The term “Zero-rated supplies” in UAE refers to any taxable supply on which VAT is zero charged. Moreover taxation charged here is based on the nature of supply, despite the goods or services stocked or specified goods or services enlisted under zero rated list.
In general, total export of goods and services in UAE is considered as zero rated supplies, however certain conditions are applicable for a supply to be qualified as zero-rated in UAE executive regulations.
Which service or goods are zero-rated for VAT in UAE?
The following categories of goods & supplies are zero rated in UAE. But as mentioned above, supplies & services need to meet all conditions mentioned in UAE executive regulations:
1. Any direct/indirect export of goods & services outside enforcing States
2. Telecommunications Services that’s exported
3. Global transportation service for Passengers and Goods
4. Stock or import of investment precious metals (gold, silver and platinum with purity of 99% or more) which is tradable in global bullion markets
5. Residential buildings designed for commercial residence including hostels for college students or school pupils, armed forces and police, orphanage, nursing home, and rest homes
6. Buildings used by charitable trusts
7. Education services
8. Healthcare services
What is the difference b/w Zero rate and Exempt supplies?
It’s an obvious question, since conclusion of both zero-rated supplies and exempt supplies are same, but difference is in the process of claiming input tax credit (ITC). If you purchase goods or services noted as zero-rated supplies, you can claim paid VAT as ITC and set-off against your output liabilities. But for exempt supplies, claiming ITC on VAT paid on your purchases is not applicable. Also, you’ll be needed to report the details of zero rated supplies and exempt supplies separately in VAT Return.
To conclude, if you have any doubt regarding VAT policies in UAE, better to consult any trusted vat consultants in Dubai for more clarifications, since it’s important for businesses to know about the zero-rated supplies in detail along with the difference between zero-rated and exempt supplies as VAT charge rules are bit-different in each of these cases. It will also be helpful for the organizations in making accurate claims of ITC and VAT returns.