Categories of Goods & Services under VAT in UAE

Posted on Oct 28, 2017

Categories of Goods & Services under VAT in UAE

The implementation of VAT is set to be on 1 January 2018, being forced on specific goods and services. The law laid out few exemptions and zero-rated goods and services. VAT is a sort of general utilization that is gathered incrementallyand the end customer will pay the VAT.

VAT is otherwise called goods and service tax (GST) in a few sections of the world. Implementing 5% rate, the UAE has one of the lowest value-added tax (VAT) rates among the other countries of the world. Before proceeding further one should understand the meaning of Zero-rated tax and exempted supplies. Zero-rated implies that the products are still covered under VAT - however assessable at the rate of 0%. Exempted supply of goods and services are those supply which are not covered under VAT i.e. the supplier of exempted goods and services need not get itself registered under VAT and do the compliances.

There are two types of Supplies in the UAE VAT, for example,

Exempted Supplies and Taxable Supplies.

Taxable Supplies:

Taxable or standard rate supplies are those provisions which will have an effect of 5% VAT in the UAE. For Standard Rate supplies, input Vat can be claimed and adjusted with the output VAT liability.

Following are the Taxable or standard rated Supplies under the UAE VAT:

  • Retail purchases
  • Car sales and Rentals
  • Hotel industry
  • Repairs and maintenance services
  • Commercial property and lease

Exempted supplies:

Exempted supplies are those supplies  which are unaffected by VAT i.e. these are those supplies which are not covered under VAT Law. Therefore and VAT paid on Input supplies will be added in the cost and refund cannot be claimed.         

Following are the basic Exempt Supplies under the UAE VAT:

  • Bare land
  • Residential Property Leases
  • Residential Property Second Sales onwards
  • Transportation (local) Taxi, Bus, Metro etc.
  • Some sort of financial services

Zero Rated

Zero-Rated Supplies are those provisions on which the rate of VAT is 0%. However, in zero rated supplies input VAT credit  can be claimed and adjusted from output VAT liability if any for refund can be claimed.

Zero-rated supplies are:

  • Medicine and Equipment
  • Healthcare
  • International transport
  • Education
  • Investment in gold, silver and platinum
  • Exports
  • Crude oil and natural gas

 

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