VAT in UAE: What Are Zero-Rated Supplies under VAT

VAT is charged at zero rate on taxable supply and this is known as zero-rated supplies in UAE VAT. The specified goods or services which are listed under zero-rated list are charged at zero rate. It includes the nature of supply, despite the goods and services supplied.

Mostly, zero-rated supplies will include all exports of goods and services in UAE. Under the UAE executive regulations, there are set of conditions laid to qualify a supply as zero-rated which needs to be met for charging zero-rated tax:

List of Zero-rated VAT goods and services in UAE

Here is the list of zero-rated VAT goods and services in UAE. However, as mentioned above, the condition mentioned in UAE executive regulations needs to meet in order to consider the following supplies as zero-rated supplies:

  1. To all direct and indirect export of goods and services outside the non VAT States
  2. Telecommunication to be exported
  3. For Passengers and Goods there must be International transportation services including all other transportation-related services
  4. The metal is in the form which is tradable in global bullion markets and the metal purity of gold, silver and platinum must be 99% which are supplied or imported for investment precious
  5. Residential buildings intended and designed for the human occupation which includes Residential accommodation for students or school pupils, armed forces and police, orphanages, nursing homes and rest homes
  6. Charity buildings
  7. Educational services
  8. Healthcare Services

Does Zero-rate supplies and Exempt supplies in UAE VAT have any difference?

The above question is obvious because the final conclusion of zero-rated supplies and exempt supplies are similar, i.e. VAT is not charged on the supply.

Although the VAT rate is at zero percent, they have differential treatment in declaring input tax credit (ITC). While purchasing goods or services which are supplied as zero-rated supplies, you are permitted to utilize the VAT paid as ITC and set-off against your output responsibilities. You will not be allowed to claim ITC on VAT amount aid on your purchase, in case of exempt supplies.

The zero-rated supplies and exempt supplies are expected to be reported separately n VAT return. The VAT Return is yet to be made available.
So, the zero-rated supplies must be understood by businesses to know the difference between zero-rated and exempt supplies because the reason why VAT is not charged in each of these cases is different. This will help the business in making an accurate claim of ITC and filing VAT returns.

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