Saudi Arabia and the United Arab Emirates, which have long lured foreign workers with the promise of a tax-free lifestyle, plan to impose a 5 percent tax next year on most goods and services to boost revenue after oil prices collapsed three years ago.

The  VAT, will apply to a range of items like clothes,foods, electronics and gasoline, water and electricity bills, and hotel reservations.There will be some exemptions for big-ticket costs like rent, real estate sales, certain medications, airline tickets and school tuition.

Higher education, however, will be taxed in the UAE. Extra costs parents pay to schools for uniforms, school bus fees and lunch will also be taxed, as will real estate brokerage costs for renters and buyers.

 

Stores, gyms and other retailers are trying to make the most of the remaining tax-free days in Saudi Arabia and the UAE, encouraging buyers to stock up before the VAT is rolled out on Jan. 1, 2018.

Other Gulf countries are expected to implement their own VAT scheme in the coming years.

A trip to United Arab Emirates — with its emirate of Dubai being one of the most popular foreign destinations for Indian travellers — will cost 5-7% more from the New Year. Due to its dwindling oil fortunes and weakening economy.