What you should know about zero-rated goods and services in the UAE

Mamta Raj, managing director of the Flyingcolour Group talks about taxable supplies on which VAT is charged at zero rate in the UAE.

What are zero-rated supplies in UAE VAT?

It refers to the taxable supplies on which VAT is charged at Zero rate. In this case, no tax is paid to the Government and more over, we can enjoy the input VAT credit. Certain goods and services are subject to zero-evaluated VAT in UAE as per the article 45 of Federal Decree-Law Number 8 of 2017. However the business has to satisfy certain conditions which are applicable for a supply to be qualified as zero-rated in UAE executive regulations. VAT compliances and VAT registration UAE is must for zero-rated supplies.

Which service or goods are zero-rated for VAT in UAE?

The following are the categories of goods and supplies which are zero rated in UAE, however as previously mentioned they need to meet all conditions mentioned in UAE executive regulations:

1. All direct and indirect export of goods and services from UAE to outside the states

2. International and intra-GCC transport

3. Air Passenger transport

4. Supply of transport by means of air, sea and land

5. Goods and services related to the supply of the means of transport used for the course of export

6. Rescue of aircraft and vessels

7. Passenger’s transportation

8. Investment in precious metal

9. Sale of the residential building

10. Charitable building supplies

11. First supply for residential building

12. Oil & Gas

13. Educational services

14. Healthcare services

What are the benefits of zero-rated supplies?

The main benefit is that the business can claim input tax on related expenses of goods and services.

Is VAT registration required for Zero Rated Supplies?

If the value of the taxable goods and services is above the specified threshold, VAT registration in UAE is must for the business, failure to so will attract penalty.

What is VAT exempted supplies?

VAT Exempted supplies are not taxable supplies for VAT purpose it mean goods and services on which VAT is not charged. For example – raw material acquired at 5% VAT is used for the production of goods and the final goods is exempted under the law, in this case, VAT paid at 5% on input cannot be claimed as ITC and becomes cost of the product.

What is the threshold for VAT registration in UAE?

VAT registration UAE threshold includes:

• Mandatory registration threshold: If the taxable supplies in previous 12 months or next 30 days exceeds 375,000 AED

• Voluntary registration threshold: If the taxable supplies in previous 12 months or next 30 days exceeds 187, 500 AED

Do you plan to introduce any new services with an eye on 2021?

With an eye on 2021 we plan to introduce accounting outsourcing services for our international clients, excise tax consultancy and CFO services. In today's world we can send data from one end of the world to the other in a matter of seconds. Cross-borders business exercises are giving opportunity to a great extent and it is very crucial for business to understand the International Tax system if the client is planning to set-up their business outside the home country. We have dedicated team for international accounting services to helps client to understand the client tax implication on international level.

Introduced by the UAE government in 2017 Excise Tax is a form of indirect tax levied on specific goods (known as Excise goods) which are typically harmful to human health or the environment we have in-house professionals who can guide you in regards to Excise Tax. Lastly businesses thrive on growth and we at Flyingcolour assist our clients by formulating growth strategies, suggestion of optimum utilization of resources and ways to reduce cost.