UAE VAT is zero-rated and tends to create confusion between exempt and non-exempt supplies. The end result for all these supplies is the same. That is, H. Although these supplies are not subject to VAT, it is important to know the actual differences between these supplies. This is also important from a reporting perspective, as the value of each of these deliveries must be clearly categorized in the VAT declaration.

Use the table below to understand the differences between these supplies.

Zero-rate supplies

Exempt supplies

Out-of-scope supplies


Zero-rate supplies are taxable supplies to which VAT is applicable. Added 0%. Should be charged.

Duty-free supplies are certain supplies declared as exempt from tax. There should be no VAT applied to these supplies.

Supplies that are excluded from the VAT’s scope are known as out-of-scope supplies.

Input tax recovery

These are considered as taxable supplies. Therefore, supplies utilised to create zero rate supplies are eligible for input tax recovery.

Supplies used to create exempt supplies are not eligible for input tax recovery.

Out of scope supplies are not covered by VAT, hence there is no such thing as input tax collection for them.


1. Export of goods to countries that do not apply VAT in the GCC
2. Service exports to countries outside the GCC
3.Supply of precious metals

1.Supply of specific financial services
2.Supply of bare land
3.Supply of local passenger transport
4.Supply of residential buildings by sale or lease, other than those which are zero rated

1.Supplies by persons not registered under VAT
2.Specific supplies by the Government

Thus, as you can see, even though there is no VAT associated with any of these deliveries, there is a significant distinction between them in that there is a zero input tax recovery allowed. rate supplies; exempt supplies are not permitted. . Since out-of-scope supplies are not covered by VAT, there is no such thing as input tax recovery in this situation. Furthermore, there are several explanations for not charging VAT on certain supplies. It is important to understand the differences between these supplies so that you can properly file your VAT return and recover input tax only on eligible supplies.

You can also register for VAT Registration on our website:

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