Zero-rated supplies under UAE VAT entail taxable transactions on which VAT is levied at a zero rate. This zero tax rate can apply based on the nature of the supply, regardless of the specific goods or services involved, or for specified items listed under the zero-rated category.
In the UAE, most exports of goods and services are automatically considered zero-rated supplies. However, certain conditions outlined in the UAE executive regulations must be met to qualify for the zero tax rate.
The following is a list of goods and services that fall under the zero-rated category in UAE. Please note that to qualify as zero-rated supplies, one must adhere to the conditions outlined in the UAE executive regulations:
1. All direct and indirect exports of goods and services to countries outside the implementing States.
2. Exported Telecommunications Services.
3. International transportation services for passengers and goods, including related transportation services.
4. Supply or import of investment precious metals, such as gold, silver, and platinum, with a purity of 99 percent or higher and in a form tradable in global bullion markets.
5. Residential buildings designed for human habitation, including accommodations for students, armed forces and police, orphanages, nursing homes, and rest homes.
6. Buildings specially designed for use by charitable organizations.
7. Education services.
8. Healthcare services.
Now, when comparing zero-rated supplies to exempt supplies in UAE VAT, it’s important to recognize that the end result is the same – VAT is not charged on the supply. However, there’s a crucial difference in how input tax credit (ITC) is treated:
For goods or services purchased as zero-rated supplies, you’re allowed to claim the VAT paid as ITC, which can be set off against your output liabilities.
In the case of exempt supplies, you cannot claim ITC on the VAT amount paid for your purchases.
Moreover, you can anticipate that zero-rated supplies and exempt supplies will likely be reported separately in the VAT Return, although the exact format is still pending.
In summary, it’s vital for businesses to grasp the concept of zero-rated supplies and differentiate them from exempt supplies, as the reasons behind not charging VAT in these cases differ. Understanding this distinction is crucial for accurately claiming ITC and filing VAT returns.
You can also register VAT Registration in our website: