Explaining Standard, Zero-Rated and Exempt Supplies in UAE VAT
While introducing the Value Added Tax in the UAE (VAT) the government has given four types of VAT ratings for supplies: the standard rating at 5%, zero-rate, exempt and out-of-scope supplies. VAT consultants in Dubai have often witnessed taxpayers getting confused to differentiate between the standard, zero-rated, exempted and out-of-scope supplies. Differentiating between different types of VAT ratings in the UAE is important as a clear bifurcation of the value of each supply must be furnished in the VAT returns.
You can seek the help of tax agents in Dubai to assess the rating of the taxable supplies your company make. Further details can be obtained by going through the following article. Read ahead to understand the Standard, Zero Rate, Exempt and Out of Scope Supplies in UAE VAT:
Standard-Rated Supplies of VAT
As per the regulations of VAT in the UAE, standard-rated supplies are those charged with 5% tax at the time of the supply. Standard rating applies to all the supplies traded on the mainland where the supplier and the recipient are located in the UAE (Exceptions apply for supplies specified as zero-rated or exempted supplies). The mainland, for the purpose of VAT, can be defined as any place in the UAE which is not a Designated Zone. More clarification on the subject can be obtained by consulting with the best VAT consultants in Dubai.
Consider the following scenarios to get a good grasp of the standard-rated VAT supplies in the UAE:
- A sale between a supplier and recipient both of whom are inside the UAE mainland, given that the goods or services are also incurred in the UAE mainland
- A supply of goods which are transferred from the mainland to a Designated Zone in the UAE
- Supply of all services happening in the UAE as a whole including the transfer of services within the same Designated Zone
Zero-Rated Supplies of VAT
Zero-Rated Supplies are supplies that are rated at 0% and not 5%. Zero-rated supplies under VAT in the UAE must be properly declared in the VAT returns submitted during every tax period. You can seek the help of tax agents in Dubai to properly declare zero-rates supplies in the VAT returns. The following supplies are treated as zero-rated VAT supplies in the UAE:
- Supply of precious metals (Gold, Silver, and Platinum) that are 99% pure and available in the tradeable form
- Supply of certain educational services and associated goods and services
- Supply of certain healthcare services and related goods and services
- First supply of newly constructed residential properties
- First supply of a charitable building
- First supply of buildings converted from non-residential to residential through sale or lease
- International transportation of goods and services (inbound and outbound)
- Export of goods and services
- Supply of certain means of transportation, where it is designed to be used for commercial transportation purposes.
- Supply of crude oil and natural gas
- Supply of aircraft or vessels designated for rescue and assistance by air or sea
- Air passenger transport in the UAE, if it can be considered an “international carriage” as per Article 1 of the Warsaw Convention for the Unification of Certain Rules Relating to International Carriage by Air 1929
Exempt Supplies of VAT
Federal Decree-Law No. (8) of 2017 on Value Added Tax defines Exempt Supplies as supplies where no tax is due and no input tax may be recovered, except as per the provisions of the same law. It means exempt supplies are the supplies traded within the UAE without any VAT, neither 0% nor 5%. Consult with VAT consultants in Dubai to know further about exempt supplies.
- Financial services
- Supply of residential buildings through sale or lease, other than that is zero-rated according
- Supply of bare land.
- Supply of local passenger transport
Out-of-Scope Supplies of VAT
Out-of-scope supplies are the supplies that are outside the purview of the VAT in the UAE. Unlike the Standard-rated, zero-rated and exempt supplies, you don’t need to declare out-of-scope supplies in the general VAT returns submitted in each tax period. Moreover, companies that make only out-of-scope supplies need not register for UAE VAT. However, they can carry out voluntary VAT registration in the UAE if their taxable supplies cross the voluntary registration threshold of AED 187,500. Consult with VAT consultants in Dubai to clear the air on out-of-scope Supplies of VAT.
Consult with the Best VAT Consultants in Dubai, UAE
It is extremely important for companies to properly assess the tax treatment of their supplies for which they can consult with the best VAT consultants in Dubai such as Jitendra Chartered Accountants (JCA). JCA is one of the leading tax agents in Dubai, approved by the Federal Tax Authority (FTA)