On 1st Jan 2018, the United Arab Emirates have implemented the concept of Value-Added-Tax (VAT), to build a unique route for revenue generation. This concept gets implied on the business entities who are entitled to deal with VAT with a rate of 5 percent. Over the implementation of the same, there is another concept referred to as zero-rated goods.
If you are a business owner dealing with import-export of goods and services, then possessing knowledge on the zero-rated supplies will turn out to be beneficial for you. This guide highlights the core concept of zero-rated supplies and the relevant goods and services where it gets implemented. Let’s get started.
What is Zero-Rated Good and Supply?
The concept of zero-rated goods is often confused with tax-exempted products. However, in reality, it is not the same. The zero-rated products are applied to the products and supplies wherein you can claim input, but the Value Added Tax rate applicable to such goods and services stands at zero percent. While dealing with business transactions, it is essential to maintain proper accounting and bookkeeping records concerning zero-rated products and supplies. These recordings will help you to keep track of your business performance at ease.
Application of Zero Rate Supply of Goods and Services
The Zero rate shall apply to the following goods and services:
- Direct or indirect export to outside states as specified in the Executive Regulation of this Decree-Law.
- International transport of passengers and goods starts or ends in the state or passes through its territory, including transport-related services.
- Air passenger transport in the State if it is considered an “international carriage” according to Article 1 of the Warsaw Convention for the Unification of specific rules relating to the International Carriage by Air 1929.
- Supply of air, sea, and land means to transport for the transportation of passengers and goods as specified in the Executive Regulation of this Decree-Law.
- The supply of goods and services related to the supply of the means of transport mentioned in Clause (4) of this article is designed for the operation, repair, maintenance, or conversion of these means of transportation.
- Supply of aircraft or vessels designated for rescue and assistance by air or sea.
- Supply of goods and services related to the transfer of goods or passengers abroad land, air, or sea means, designated for consumption onboard, or anything consumed by any means of transport, any installation or addition to that, or any other use during transportation.
- The supply or import of precious metals. The Executive Regulation of this Decree-Law shall specify the precious metals and the standards based on which they are classified as being for investment purposes.
- The first supply of residential buildings within three years if its completion, either through sale or lease in whole or in part, according to the controls specified in the Executive Regulation of this Decree-Law.
- The first supply of buildings specifically designed to be used by charities through sale or lease according to the controls specified in the Executive Regulation of this Decree-Law.
- The first supply of buildings converted from non-residential to residential through sale or lease according to the conditions specified in the Executive Regulation of this Decree-Law.
- The supply of crude oil and natural gas.
- The supply of educational services and related goods and services for nurseries, preschool, school education, and higher educational institutions owned or funded by Federal or local Government, as specified in the Executive Regulation of this Decree-Law.
- The supply of preventive and primary healthcare services and related goods and services according to what is specified in the Executive Regulation of this Decree-Law.
It can be seen that proceeding ahead with the zero-rated business goods and services becomes profitable. At the same time, it is to be noted that the recordings of the business transactions need to be maintained in an error-free way. Business owners and investors mostly prefer to proceed ahead with professional experts who are well-versed with the maintenance of business books.
Why to Avail Professional Services?
Outsourcing the maintenance of business records to the professional experts helps a business owner in the following ways:
- The company books get sorted accordingly.
- Existing files gets evaluated and sorted.
- VAT Return Filing process turns out to be an easy one
- Outsourcing helps the business owners to minimize their burden.
- The time and resources can be utilized productively.
How Can We Help?
JAXA Chartered Accountants has been standing as one of the top ten accounting firms in the UAE, continually delivering accounting and audit services to the business firms across the nation. Our experts are well-versed with the industry proceedings and can cater to tailored solutions suiting the business needs. If you hold any query or want to implement the zero-rated processes in your business premise, feel free to have a word with our accounting experts. Contact us today-we’d be glad to assist.