Zero-Rated Supplies in UAE VAT

Tally Solutions | Updated on: May 13, 2021

Zero-rated supplies in UAE VAT refers to the taxable supply on which VAT is charged at zero rate. Here, tax is charged at zero-rate either based on the nature of supply, regardless of the goods or services supplied or the specified goods or services which are listed under zero-rated list.

Generally, all exports of goods and services in UAE will be considered as zero-rated supplies. However, to qualify a supply as zero-rated, there are a set of conditions laid out in UAE executive regulations which needs to be met for charging zero rate tax

List of Zero-rated VAT goods and services in UAE

The following are the list of zero-rated VAT goods and services in UAE. However, as mentioned earlier, to consider the following supplies as zero-rated supplies, the conditions mentioned in UAE executive regulations needs to be meet.

All direct and indirect export of goods and services to outside the implementing States
Exported Telecommunications Services
International transportation services for Passengers and Goods including all other transportation-related services
Supply or import of investment precious metals such as gold, silver and platinum where the metal purity is 99 percent or more and the metal is in a form which is tradable in global bullion markets
Residential buildings intended and designed for human occupation which includes Residential accommodation for students or school pupils, armed forces and police, orphanages, nursing homes, and rest homes
Buildings specifically designed to be used by charities
Education services
Healthcare services

Is there any difference between Zero rate supplies and Exempt supplies in UAE VAT?

The above question becomes obvious, because, the end result of zero-rated supplies and exempt supplies are same, i.e. VAT is not charged on the supply.

Though the VAT rate is at zero per cent they have differential treatment in claiming input tax credit (ITC). On the purchase of goods or services which are supplied as zero-rated supplies, you are allowed to avail the VAT paid as ITC and set-off against your output liabilities. In the case of exempt supplies, you will not be allowed to claim ITC on VAT amount paid on your purchases.

Also, you may expect the details of zero-rated supplies and exempt supplies to be reported separately in VAT Return. The VAT Return format is yet to be made available.

Thus, it is important for businesses to understand the zero-rated supplies and know the difference between zero-rated and exempt supplies because the reason why VAT is not charged in each of these cases is different. This will help the business in making an accurate claim of ITC and filing VAT returns.