What Careem Wants You To Know About Value Added Tax (VAT) in the UAE

Starting next year, a 5% Value Added Tax (VAT) will be introduced in the GCC. The UAE will be one of the first member countries to implement VAT on most goods and services, coming into effect on January 1, 2018.

Under Article 23 of the UAE VAT Implementing Regulations, VAT is applied on any service delivered over an electronic marketplace. Since transportation is exempt from VAT but Careem’s electronic marketplace service is not, your ride with Careem will be taxed only on the portion of the fare that is attributable to our marketplace service. This will translate into an average fare increase of 1%.

The final charge reflected on your receipt will be inclusive of VAT. Careem is committed to operating in accordance with the law in the UAE and in all of the markets in which it operates.

Continue reading for more information on VAT:

What is VAT?

VAT is an indirect tax. Occasionally, you might also see it referred to as a type of general consumption tax. In a country which has a VAT, it is imposed on most supplies of goods and services that are bought and sold. It will be payable by both businesses and individuals.

Why is VAT being implemented in the GCC?

VAT will help the GCC governments boost its coffers to further improve infrastructure and offer better facilities.

Will Careem charge VAT on their services?

Yes. Under Article 23 of the UAE VAT Implementing Regulations, VAT is applied on any service delivered over an electronic marketplace. Since transportation is exempt from VAT but Careem’s electronic marketplace service is not, your ride with Careem will be taxed only on the portion of the fare that is attributable to our marketplace service. This will translate into an average fare increase of 1%.

But you mentioned that transportation is exempt in the UAE, so why is Careem charging VAT?

Even though transportation is exempt from VAT, Careem’s electronic marketplace service is not, therefore your ride with Careem will be taxed only on the portion of the fare that is attributable to our marketplace service.  This will translate into an average fare increase of 1%.

What will be exempt from the tax?

The UAE government has already announced that certain health, education, and social services would also be exempt from VAT.

What will be taxed?

Retail, eating out, telecommunications, insurance, water and electricity, financial services, hotels, fuel and entertainment are all examples of types of goods and services that will attract VAT.

How does the Government collect VAT?

Businesses will be responsible for carefully documenting their business income and costs and associated VAT charges. Registered businesses and traders will charge VAT to all of their customers at the prevailing rate and incur VAT on goods / services that they buy from suppliers. The difference between these sums is reclaimed or paid to the government.