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Types Of Supply

Supplies under the UAE VAT Law are classified as :

The standard VAT rate of 5% will be applied to almost all goods and services in the UAE. The standard rate will apply to the sale and lease of commercial property, hotel and restaurant service, repairs and maintenance services, and more.

Zero rated supply

Zero rated supplies are taxed at 0%. The invoice for a zero rated product should include a tax column showing a zero rate and zero value. The reason for showing the zero value in the invoice is to ensure that this transaction is not used to claim tax offsets later. However, if you purchase an item for which the tax has already been paid and later the item is sold, you are eligible to claim the tax credits for your purchase.

VAT-exempt supply

Supplies which are unaffected by the VAT implementation are known as exempted supplies. No tax will be charged for such supplies, and any tax which was previously paid on their purchase will not be available for credit.

Out-of-scope supply

If an overseas supplier or a non-registered entity supplies goods or services to an overseas person, these supplies will be considered out-of-scope for VAT in the UAE.

There are two basic kinds of out-of-scope supply :

When goods are imported from an overseas supplier and sold to an overseas buyer, without being brought into the UAE, it is considered out-of-scope. This is also known as merchant trading.

If a VAT-registered person in the UAE supplies goods or services to a VAT-registered person in another GCC state, the sale is said to be outside the scope of VAT.

Deemed supply

A deemed supply will occur when a business purchases something, claims input VAT for it, and later puts the item to a non-business or private use. When a VAT-registered business deregisters, any goods held by the business for which the input tax has already been recovered are treated as deemed supplies.

Composite supply

A composite supply occurs when two or more goods or services are sold together as a set. To qualify as a composite supply, the items cannot be sold individually. The VAT rate on a composite supply is determined by the principal component.

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