Zero or no VAT for particular goods and services in the UAE

Description: Here are all the details you are looking for about the zero-rated and no VAT applicable goods and services in the UAE.

With VAT fixed at 5%, the UAE has one of the least value-added taxes (VAT) rates in the world. The VAT implementation started on 1 January 2018. But the law laid out a couple of exemptions and zero-rated goods and services.

What is Zero-rated VAT?

Any goods and services exported to a Gulf Cooperation Council (GCC) country that has not implemented VAT yet are subject to zero-rated VAT. The zero-rated goods and services include internationally transported goods and passengers, as well as a transfer that starts or even ends in the UAE region.

Have a word with accounting experts to know about the details and assistance regarding VAT consultancy services.

Difference between Zero-rated VAT and Exempt VAT

Taxable goods and services rated at 0% VAT are zero-rated goods and services.  VAT-registered businesses which produce zero-rated supplies or services have the right to claim their input tax deductions they obtained in the course of producing the taxable supplies.

The exempt VAT is the supply of goods and services which are not subjected to any VAT rate.

Goods and Services applicable for Zero Rated VAT

There are 14 goods and services subjected to zero-rated VAT, under Article 45 of Federal Decree-Law, 8 November 2017.

• International Transport

International air-fairs are under zero-rated as it states that goods and services transported internationally starting or ending in the UAE or crossing any part of the region that includes services related to such transport.

• Direct or Indirect Exports

Direct or indirect exports outside the UAE to states in the GCC region that do not implement VAT, as clearly stated in the Executive Regulation of this Decree-Law rated at 0% VAT.

• Air Passenger Transport

As mentioned in the third number in Article 45, the transport of air passengers in the region is also included in zero-rated VAT. It is applicable if it is considered an ‘international carriage’ according to Article (1) of the Warsaw Convention for the Unification of Certain Rules Relating to International Carriage by Air 1929.

• Supply of Air, Sea, and Land Means of Transport

According to Executive Regulations of this Decree-Law, the supply of sea, air, and land means of transport for the transportation of passengers and goods are also zero-rated.

• Goods and Services related to the Supply of Means of Transport

The supply of goods and services for operation, repair, conversation, or maintenance of the means mentioned above of transport are zero-rated.

• Supply of Goods and Services related to the Transfer of Goods and Services

The goods and services for consumption onboard, or anything meant to be consumed by any means of transport, any additions or installations or any other use during transportation shall be included in this application as well.

• Aircraft and Vessels for Rescue

Aircraft and vessels that are intended for rescue and assistance by air or sea will have zero-rated applies to them.

• Investment in Precious Metal

Supply or import of investment in precious metals come in the eighth place of the list. According to the Executive Regulation of this Decree-Law, it specifies the precious metals as well as the basis of the standards by which the goods mentioned above classifies for investment purposes.

• Sale of Residential Building

According to the controls specified in the Executive Regulations of this Decree-Law, residential buildings in its first three years of completion, may it be for lease or sale in whole or in part, shall be under the zero rate.

• Charitable Building Supplies

If the purpose of the building is for charity, the first supply shall have a zero rate on them (sale or lease).

• First Supply for Residential Buildings

Buildings converted from non-residential to residential are under zero rate and have a zero rate on its first supply (sale or lease).

• Oil and Gas

Standing at number 12 on the list, crude oil and natural gas have zero VAT rate.

• Educational Services

According to the Executive Regulation of the Decree-Law, zero rates apply to educational services and related goods and services for nurseries, preschools, elementary and higher education institutions. The institutions must be owned or funded by the federal or local government.

• Healthcare Services

Healthcare services and supply of primary healthcare and related goods and services, falling at the last place in the list, have zero-rated VAT.

Goods and Services Exempted from VAT

There are only four items listed as exempt from VAT according to Article 46. The four suppliers are listed below.

• Supply of bare land.
• Supply of local passenger transport.
• Financial services specified in the Executive Regulation of the Decree-Law.
• Supply of residential buildings through lease or sale, other than the ones zero-rated according to Clauses (9) and (11) of Article (45) of this Decree-Law.

Implementation of VAT can support the UAE government in its goal and strengthen the economy and enhance the services they offer.

For more information on VAT rules and registration services, have a word with professionals at Jaxa Chartered Accountants, one of the top Accounting services in the UAE region. To avail our assistance for your company contact us.