There is often confusion surrounding zero rate, exempt, and out of scope supplies under UAE VAT legislation. While VAT Registration is not charged on any of these supplies, there are key differences to understand.
Zero rate supplies are considered taxable, so VAT Registration uae is charged at 0%. Input tax can be recovered on expenses related to making zero rated supplies. Examples are exports and precious metals.
Exempt supplies are specifically declared exempt from VAT, so no VAT Registration is charged. However, input tax cannot be recovered on costs related to making exempt supplies. Examples are financial services and residential buildings.
Out of scope supplies fall outside the VAT Registration system altogether. There is no concept of input tax invoice recovery as these supplies are not subject to VAT at all. Examples are supplies by unregistered businesses and certain government supplies.
Although VAT dubai is not charged on zero rate, exempt or out of scope supplies, it is crucial to understand the differences. This is important for accurately filing VAT return uae and claiming input tax deductions only where eligible. Proper classification allows input tax recovery on zero rate supplies, while denying recovery on exempt supplies since no output VAT is charged. Out of scope supplies fall completely outside the VAT Registration system.
