What is zero-rated & exempted VAT? UAE ministry of finance published the list of economic activities categorized under zero-rated VAT & exempted VAT in UAE.

1. PAY ZERO OR NO VAT ON THESE
TYPES OF GOODS & SERVICES IN UAE

2. Last Sunday, 27th of August, the Federal Decree-Law Number 8 of 2017 for the Value-Added Tax
has been issued by President His Highness Sheikh Khalifa bin Zayed Al Nahyan. With 5% rate, the
UAE has one of the lowest value-added tax (VAT) rates in the world.
The implementation of VAT is set to be on 1 January 2018, being imposed on certain goods and
services. However, the law laid out a couple of exemptions and zero-rated goods and services.
PAY ZERO OR NO VAT ON THESE TYPES OF GOODS & SERVICES IN UAE

3. What Does Zero Rated VAT Mean?
Any goods and services are subject to zero rated when those are exported to a Gulf Cooperation
Council (GCC) country that hasn’t implemented VAT just yet. This includes the passengers and
goods that are transported internationally, as well as a transfer that starts or even ends in the
UAE or cross any part of its region.
PAY ZERO OR NO VAT ON THESE TYPES OF GOODS & SERVICES IN UAE

4. Difference between Zero-Rated VAT vs Exempted VAT
Simply put, a zero-rated VAT is a supply of goods and services that are taxable but VAT is imposed
at 0%. VAT-registered businesses that produce zero-rated supplies/services have the right to
claim their input tax deductions that they have obtained in the course of producing the
aforementioned taxable supplies. On the other hand, an exempt VAT is the supply of goods or
services that are not subjected to any VAT rate.
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5. Good & Services Under Zero Rated Tax
Based on the Article 45 of Federal Decree-Law Number 8 of 2017, there are 14 goods and
services that are subject to zero-rated VAT.
i) Direct or Indirect Exports
The first on the list is the direct or indirect export outside the UAE to states in the GCC that do
not implement VAT, as clearly stated in the executive regulation of this decree-law
PAY ZERO OR NO VAT ON THESE TYPES OF GOODS & SERVICES IN UAE

6. ii) International Transport
International airfares will be under the zero rate as it is stated that goods and services that are
transported internationally starting or ending in the UAE or crossing any party of its region, which
includes services related to such transport, will have zero rates applied on them. (7.) The goods
and services for consumption on board, or anything at all that is meant to be consumed by any
means of transport, any installations or addition thereto or any other use during transportation
shall be included in this application as well.
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7. iii) Air Passenger Transport
As mentioned on the third number in Article 45, the transport of air passenger in the country is
also included “if it is considered an “international carriage” pursuant to Article (1) of the Warsaw
Convention for the Unification of Certain Rules Relating to International Carriage by Air 1929.”
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8. iv) Supply of Air, Sea and Land Means of Transport
In accordance with the Executive Regulations of this Decree-Law, the supply of air, sea, and land
means of transport for the transportation of passengers and goods.
v) Goods & Services Related to the Supply of the Means of Transport
The supply of goods and services for the operation, repair, maintenance, or conversation of the
aforementioned means of transport are also under zero rate.
PAY ZERO OR NO VAT ON THESE TYPES OF GOODS & SERVICES IN UAE

9. vi) Aircraft & Vessels for Rescue
Aircrafts and vessels that are intended for rescue and assistance by air or sea will have zero
Aircrafts and vessels that are intended for rescue and assistance by air or sea will have zero rated
applied on them.
vii) Supply of Goods and Services Related to the Transfer of Goods or Passengers
The goods and services for consumption on board, or anything at all that is meant to be
consumed by any means of transport, any installations or addition thereto or any other use
during transportation shall be included in this application as well.
PAY ZERO OR NO VAT ON THESE TYPES OF GOODS & SERVICES IN UAE

10. viii) Investment in Precious Metal
The eight on the list is the supply or import of investment precious metals. With accordance to
the Executive Regulation of this Decree-Law, it will specify the precious metals as well as the basis
of the standards by which the aforementioned goods are classified as for investment purposes.
ix) Sale of the Residential Building
In accordance with the controls specified in the Executive Regulations of this Decree-Law,
residential buildings in its first three years of completion, may it be for sale or lease in whole or in
part, shall be under zero rate.
PAY ZERO OR NO VAT ON THESE TYPES OF GOODS & SERVICES IN UAE

11. x) Charitable Buildings Supplies
If the buildings are for the purpose of being used by charities, the first supply shall have zero
rated applied on them (sale or lease).
xi) First Supply for Residential Building
Buildings that are converted from non-residential to residential will be under zero rate as well in
its first supply (sale or lease).
xii) Oil & Gas
Crude oil and natural gas are under zero rate as the number 12 on the list.
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12. xiii) Educational Services
As per the Executive Regulation of this Decree-Law, zero rated shall apply on educational services
and related goods and services for nurseries, preschool, elementary education, and higher
education institutions that are owned or funded b the federal or local government.
xiv) Healthcare services
The last on this list is, in accordance with the Executive Regulation of this Decree-Law, the supply
of preventive and basic health care services and related goods and services.
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13. Goods and Services Exempted from VAT
There are only four items that are listed as exempted from VAT as per Article 46 of the Federal
Decree-Law Number 8 of 2017:
i). Financial services that are specified in the Executive Regulation of this Decree-Law
ii). Supply of residential buildings through sale or lease, other than that which is zero-rated
according to Clauses (9) and (11) of Article (45) of this Decree-Law
iii). Supply of bare land
iv). Supply of local passenger transport
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14. Conclusion
It has been discussed before that the implementation of VAT can support the UAE government in
its goal to strengthen the economy and enhance the services for the public.
The rest of the countries in the GCC are expected to follow the UAE and Saudi in executing the
VAT between 1 January 2018 to 1 January 2019.
For more information regarding VAT or if you need a consultation, please contact us here.
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PAY ZERO OR NO VAT ON THESE TYPES OF GOODS & SERVICES IN UAE