What are Zero-rated Supllies under UAE VAT?
The taxable supply on which VAT is charged at zero-rate are referred to as zero-rated supplies under the UAE VAT Law. The tax is charged at a zero rated on these taxable supplies 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. Usually all exports of goods and services from UAE, nil rated goods and services will be considered as zero rated supplies. However, to qualify a supply as zero-rated, there are set of conditions laid out in UAE VAT Law which need to be met for charging a zero rate tax.
List of Zero-rated VAT goods and services in UAE
Supplies subject to zero-rate are listed in Article 45 of the Federal Decree-Law no. (8) of 2017 on Value Added Tax, such as:
- 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?
Though the end result of zero-rated supplies and exempt supplies are same, i.e. VAT is not charged on the taxable supplies they both have a differential treatment in claiming input tax credit (ITC). On the purchase of goods or services which are supplied as zero-rated supplies, the taxable person is allowed to avail the VAT paid as ITC and set off against their output liabilities. In case of exempt supplies, the taxable person will not be allowed to claim ITC on VAT amount paid on your purchases.
Thus, it is important for businesses to understand what zero-rated supplies are 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.