Telecom firms clarify on VAT for recharge cards

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Dubai: Don’t pay extra when buying mobile phone prepaid recharge cards, telecom companies told customers on Wednesday.

The five per cent value-added tax (VAT) introduced in the UAE on January 1 is applied on goods and services that come under the purview of VAT law.

Telecom companies are charging five per cent VAT for their services. For postpaid users, the VAT is calculated and included in their bill. Prepaid customers are not charged upfront when the sale of calling cards is made.

However, some said on social media that they were charged VAT twice when they bought prepaid cards and made calls.

A twitter user said on Tuesday: “So with the introduction of the VAT in #UAE I’m getting taxed twice over with my phone line. Once when I purchase the credit (fair and understandable) and again on every call I make? That’s ridiculous. Something tells me this wasn’t thought through at all.”

Etisalat denied this and clarified how the taxes are being levied.

“Etisalat has introduced five denominations of recharge cards sold at Dh30, Dh55, Dh110, Dh210 and Dh525 to ensure customers have sufficient credit to subscribe to existing data and combo packages after adding five per cent VAT. The five per cent VAT will only apply on the actual usage, and not on the prepaid recharge cards value. Prepaid users will not pay any extra fee when they recharge,” the management said in a statement.

Etisalat has asked distributors to not charge extra 5 per cent on top of the approved pricing policies. It also cautioned customers not to pay more than the printed amount on any of its recharge cards.

Telecom company du also said customers buying prepaid recharge cards should only pay for the amount stated on the card. VAT will be deducted from the card balance based on the user’s actual usage.

“Users will continue to pay the amount printed on the recharge card. VAT will apply only when [they] use the credit towards our services,” a du spokesperson said.

VAT will not be applicable to third-party purchases, roaming services, and donation SMSes.