Dining out is an important feature of Emirati lifestyle. It is more prominent in big cities like Dubai, Abu Dhabi and Sharjah where large numbers of foreigners are residing and food items from various parts of the world is served in restaurants. It is the reason that hotel and restaurant business is growing steadily in Dubai and other major cities. Big and small investors from all around the world are taking advantage of this booming industry in UAE is it is evident from ever increasing number and types of restaurants in UAE. Like most of the other sectors, this sector also remained tax free for diners and investors, but now the UAE government has decided to take its share from the restaurant business.
According to recent reports, the UAE government will impose 5% value added tax (VAT) on all the food items from 1st January 2018 and it will also include restaurants and other businesses related to foods and beverages. So, those people who love to dine out will now have to pay 5% extra in their bills from January 01, 2018. The UAE government has taken quite impartial approach in this process without any discrimination as 5% flat tax will be applied on all types of restaurants including fast food outlets along with those that provide Arabic, Asian, Chinese, Continental and other types of cuisines.
According to a recent report, UAE residents spent between AED 50 and AED 150 per person on dining out. 24% of total UAE residents choose outside locations 8 times in a month (i.e. on weekends) for their lunch and dinner. Most of these (more than 90%) like to eat dinner in a new restaurant or cuisines every time. This study clearly highlights the habit of Emirati citizens to dine outside with friends and family members. The UAE government is intending to raise hefty amount of money for its budget by applying tax on this lucrative sector. But this might decrease number of visits by people slightly because frequent visits can put burden on the pockets of those who love to dine out.
This expected decrease in number of people visiting restaurants will surely affect the hotel and restaurant business. People from all around the world are present in this sector in UAE in large number but this new tax will slightly obstruct the growth of sector at least for some time. But the tax is minimal and people will become accustomed after some time due to the low tax rate of 5%. Therefore, it is expected that the growth of food and beverages sector will not be affected much in longer run with this step. For further details and information about the impact of VAT on your daily life and business, you can contact Riz & Mona Consultancy via our WhatsApp # 971-56-9971225.