UAE VAT Taxable and Exempt Supplies

VAT Taxable and Exempt Goods and Services Explained

Taxable supplies include:

Standard rated supplies – 5% VAT unless zero rated, exempt or out of scope.

Zero-rated supplies – not subject to VAT, right to an input tax deduction on the corresponding expenses. Examples:

  • Export of goods and services to outside of GCC
  • International air transport
  • First sale of newly constructed residential property within 3 years
  • Government funded education
  • Preventive and basic healthcare
  • Supply of crude oil or natural gas

Exempt supplies and supplies outside of scope for VAT are not used in calculating the VAT registration thresholds. Not subject to VAT – no right to an input tax deduction on the corresponding expenses.

Exempt supplies:

  • Margin (and not commission) based financial services
  • Residential properties after the first sale or more than 3 years old
  • Bare land (undeveloped)
  • Local passenger transport (Metro, metered cabs)

Certain supplies will be considered as being out of scope of VAT for the UAE. The most obvious ones are sales outside of the country or supplies made from a non-registered entity. But other examples for out of scope are certain government activities or supplies made with no economic benefit. This includes providing goods or services to a different department in your own business.