Page update - Sep 18, 2022
The United Arab Emirates is one of the most popular shopping tourism destinations. Prices for products of world famous brands in the UAE can (but not have to) be lower than in other countries or even the country of origin. In the UAE there are low customs duties, no GST or Sales tax, and VAT tax is only 5%. Before 2018 VAT tax was 0%.
However, the situation is not easy. Brand-name stores often set high trade markup, and different malls can have very different price levels. Let's make out the situation on this page.
This page describes the situation as of September 2022. Now in the UAE, because of the pandemic, there are large reserves of goods in stocks. It is the right time for shopping - more discounts, more offers, more promotions, more profit. The Dubai Shopping Festival is soon (from December 15, 2022 to January 29, 2023).
At the beginning of the Dubai Shopping Festival the two major online sellers Club Apparel and 6th Street announced that they will sell goods without VAT from January 2, 2022 . To quote: "Club Apparel and 6th Street will cover VAT for their customers".
What exactly is meant? It's hard to say. Either they've found loopholes in the law. Or they're going to cover 5% VAT out of their own pockets. For now, we do not see any visible discount. Let's wait and watch, maybe the scheme is still under tuning and we will see good discounts later. It is likely that this practice will soon become widespread and soon shopping in the UAE will become even cheaper by 5%.
Tourists who have experience of shopping in the United Arab Emirates say different things. Some are surprised that everything is cheap there, others shout that everything is expensive. As usual, the truth is somewhere in the middle.
In fact, retailers in the UAE have a lower incoming price for goods. But they set their trade markup, and it can vary from 0 to infinity. It may happen that some products are 20-30% more expensive in a store in the Dubai Mall than in a store in the Mall of Emirates. This is a common situation.
Some brands set a clear pricing policy for all their distributors and dealers. In this case, the desired fashion bag of an expensive brand will cost the same in the US, UK, UAE, China, etc. Or maybe a clear policy for the entire country, and in this case the desired fashion bag will cost the same in all stores inside the UAE.
Let us understand in detail how the incoming price is formed when importing goods from abroad. To do this, we shall tell you about customs duties, VAT and Sales tax.
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This is a toll charged by a government for the import of goods into its territory. It may be calculated as a percentage of the value of goods or expressed in a certain price for the import of a unit, lb, liter, ft, kilogram of goods.
The customs duty additionally serves the function of protection of local manufacturers. The customs duty gives the goods of local manufacturers a price advantage over imported goods. In the UAE, there is no special need to protect local producers.
Most goods are subject to a customs duty of 5% when imported into the UAE. There are some exceptions.
Alcohol is subject to a 50% duty, therefore the very high prices of alcohol. Read our page "Alcohol in the UAE - prices and regulations" for details. There is a 100% duty on imported tobacco products, but the prices of cigarettes in the Arab Emirates are still quite reasonable. See our page "Cigarette Prices in the UAE" for details. We have clearly shown the import duties in the Arab Emirates in the photo near, click on the photo to enlarge to full screen.
As for the goods of interest to shopping lovers. The situation is clear in the UAE as the duty is 5%. In most countries, however, the rules are more difficult. For example, the duty for coats may be charged per kilogram. In such a situation, it's hard to say where the duty is lower, it depends on the weight of the coat itself.
Sales Tax. It is charged by the government once when a product is sold to the final consumer. This tax is actively used in the United States. In the UAE, the Sales tax does not exist and has never been.
Value added tax. Some people truly believe that VAT does not concern them, that it is a tax on companies. This is a big mistake. VAT is a tax on consumption.
In the countries where VAT exists, sellers are not required to write VAT on receipts, and most do not. Maybe that's why some people have the wrong stereotype that VAT doesn't concern them. McDonald's always writes the amount of tax on receipts, see the photo near, click on the photo to enlarge.
For example, in the UK the rate of VAT is 20%. When buying bread in a supermarket for 1 pound sterling, each consumer pays 0,16 of VAT tax. The consumer pays this money to the supermarket, and the supermarket pays it to the government.
Remember, consumers pay VAT! When the supermarket purchases products, it pays VAT to its supplier, and then transfers to the government the difference between the VATs on purchase and sale. This is the main convenience of VAT for the government - the tax is collected at all stages of the movement of goods from the manufacturer to the final consumer.
Even if goods are spoiled or sunken in a sea in transit, the government still gets tax on them. This is the reason why the vast majority of countries use the VAT tax system.
As of the last time this page was updated (September 2022), VAT in the Arab Emirates is only 5%. In the UK, VAT is 20%. Feel the difference!
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Same rules as VAT.
On January 1, 2018, the UAE introduced VAT tax at a rate of 5%. The tax does not apply to all goods, and there is a long list of food products, medical and educational services and others for which VAT is 0.
Only companies whose turnover exceeds 3.75 million dirhams (about $1 million) pay the tax. In the long term, all companies will pay VAT, but when exactly this will happen, the government cannot yet say.
For example in the UK, VAT tax rate is 20% (before 2011 it was 17.5%). For some food and services, it is reduced to 5%. In any case, VAT in the UAE is lower, which means prices for shopping lovers will potentially be more interesting.
Naturally, retail prices in the UAE have gone up in 2018. The price of vacation for tourists has gone up a little. But it is not worth much to be afraid of. As Khalid Al-Bustani (in the center of the photo near, click to on the photo enlarge), head of the UAE's Federal Tax Service, said before the tax was introduced: "The introduction of VAT and new customs rates will accelerate inflation by 1.4%. The figure is unpleasant, but not scary". It is now (in 2022) clear that his forecast was absolutely correct.
By the way, tourists have the right to return these 5% of VAT tax when leaving the country. The VAT refund procedure in the UAE has many features. Read our detailed review "VAT refund in UAE" about this procedure.
Let's take for example a leather handbag, which when it comes out of the factory costs USD 100. Let's calculate the incoming prices for stores in the UAE and UK. For ease of calculation, we will not take into calculation the cost of transportation and additional costs.
For the store in the UK: 100 + 12% (duty) + 20% (VAT) = USD 132.
For the store in the UAE: 100 + 5% (duty) + 5% (VAT) = USD 110.
As you can see from the calculations, the store in the UAE incoming price is 20% lower. In this situation, the UAE store has the opportunity to sell the product cheaper. Will they do? Do they want to? Do they have the right? The questions are open-ended.
Let's suppose the country of origin of this leather handbag is Italy. Now many readers say, "We need to go to Italy, where the leather handbag costs USD 100". Nothing of the sort. Even in Italy the price will be higher, because this leather handbag arrives in the Italian store already with a 22% VAT tax. In Italy the store will buy it for USD 122.
The important moment is that you can get the VAT refund (Tax Free) in Italy when you leave the country. In the UAE such a system already exists. But the system now only works with some stores - participants of the program. So far it is not worth seriously counting on it.
- If tourists come to the UAE for the first time, they immediately hurry to the biggest shopping malls - the Yas Mall in Abu Dhabi or the Dubai Mall in Dubai. Of course, it is interesting to look at these huge shopping malls, but not very profitable to buy there. Prices are usually higher in the large malls. To buy cheap visit smaller malls;
- Stay away from tourist areas where prices are always higher;
- There are shopping festivals in the UAE with great discounts, lotteries and promotions. For example, the Dubai Shopping Festival takes place throughout January or Dubai Summer Surprises takes place from July 1 to August 12. Try to come at that time, you will find many interesting offers;
- After the end of the holy month of Ramadan, comes the feast of Eid al-Fitr. At this time there are a huge number of sales and promotions. Remember, however, that the dates of Ramadan and Eid Al Fitr change every year. Read our review "Ramadan in Dubai and UAE". See the calendar in our review "Holidays in the United Arab Emirates";
- You can pay in dollars, pounds and euros, but the exchange rate will be very unprofitable. Exchange your money for dirhams for shopping, it's the best solution. Read our review "Money Exchange in the UAE";
- Read forums and discussion boards on the Internet, where tourists who have been to the UAE recently, share their experiences. The situation is changing rapidly, the prices are "jumping". On our page we give analytical information, explain the main features for tourists. But we do not claim to be a shopping guide;
- We talked in detail about the most interesting gifts and souvenirs from the Emirates in our review "What to bring from Dubai and UAE".
Good luck shopping in the United Arab Emirates, and read our interesting and useful pages about this country (see list of the pages below).
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