The UAE VAT Guide- What's Exempt and What's not

In an announcement followed by the introduction of the VAT regime in the UAE, the Federal Tax Authority (FTA) revealed a list of suppliers across the country’s various sectors to be subject to VAT. FTA also disclosed the list of supplies that apply to zero-rated tax.

Some of the government activities and supplies are considered outside the latest VAT system in the country, meaning they are entirely exempt from Value Added Tax (VAT). The government activities include those undertaken solely by the UAE government with no competition from any private sector and activities undertaken by non-profit organizations.

The UAE Cabinet expects to issue a decision that helps to identify the government bodies and non-profit organizations not subjected to the latest VAT charges. Given below is the complete outline of all the supplies subjected to 5%, 0%, and completely exempt from VAT. It is recommended that you know the difference between zero-rated VAT and Exempt VAT.

1. Education Sector

List of Services under 5% VAT rate

• Education provided by private higher education institutes, and associated goods and services
• School Uniforms
• Stationery
• Electronic Equipment like laptops, tablets, projectors, etc.,
• Renting of school grounds for events
• School trips for recreation or trips not mentioned in the curriculum
• Extra-curricular (after school) activities for an extra fee

List of Services under 0% VAT rate

• Private and public school education (excluding higher education) and associated goods and services offered by the educational institute
• Higher education offered by Government-owned or Government-sponsored (50% funded) institutes and related goods and services
• Pre-school and nursery education
• After school activities provided by teachers without any extra charges
• School trips for educational purposes (within the curriculum)

2. Healthcare Sector

List of Services under 5% VAT rate

• Healthcare services that are not a part of prevention, dental or medical treatment (elective, cosmetic, etc.,
• Medicines and medical equipment not listed in the Cabinet decision
• Other medical supplies

List of Services under 0% VAT rate

• Services for preventive healthcare including vaccination
• Healthcare services for the treatment of humans (both dental and medical services)
• Medicines and medical equipment as mentioned in the Cabinet decision

3. Oil and Gas

List of Supplies under 5% VAT rate

• Products of gas and oil (including petrol at the pump)

List of Supplies under 0% VAT rate

• Natural gas and crude oil

4. Transportation Sector

List of Supplies under 0% VAT rate

• International transportation of passengers and goods (including intra-GCC flights)
• Supply of means of transport (sea, land, and air) for commercial purposes of goods and passengers (more than ten people) transportation
• Supply of services and goods related to those particular means of transport and transportation of passengers and goods

List of Supplies Exempt from VAT

• Transportation of domestic passengers (including the flights within the UAE)

Know about the basic requirements of VAT registration in the UAE.

5. Real Estate Sector

List of Services under 5% VAT rate

• Sale and rent of commercial properties (not used for the residential purpose)
• Serviced accommodations like motels, hotels, etc.,
• Personal home owned by a UAE citizen (recoverable tax)

List of Services under 0% VAT rate

• First sale/rent of residential building after the construction or conversion finishes
• The first sale of a building used for charitable causes

List of Services Exempt from VAT

• Sale or rent of residential building following the first supply
• Bare land

6. Financial Services Sector

List of Services under 5% VAT rate

• Products having an explicit fee, commission, discount, rebate or similar element

List of Services Exempt from VAT

• Products based on margin (products without an explicit fee, rebate, commission, discount or similar element)
• Interest on various forms of lending (like loans, credit, financing lease, and cards)
• Issue, allotment or transfer of equity or debt security

7. Insurance and reinsurance Service Sector

List of Services under 5% VAT rate

• Insurance and reinsurance (including motor, property, and health)

List of Services Exempt from VAT

• Life insurance and reinsurance

8. Investment (Gold, Silver, and Platinum)

List of Supplies under 5% VAT rate

• Less than 99% pure
• Jewellery

List of Supplies under 0% VAT rate

• 99% or purer and tradable in global markets

9. Telecommunications and other electronic Services

List of Services under 5% VAT rate

• Wireless and wired telecommunications and electronic Services

10. Food and Beverages

List of Supplies under 5% VAT rate

• Food and Beverages

11. Government Activities

List of Services with VAT considered outside the VAT framework

• Sovereign activities that are not in competition with the private sector undertaken by the designated government entities

List of Services under the VAT rates dependent on service/goods ignoring the provider

• Activities that are not considered sovereign or in competition with the private sector

12. Non-profit Organizations

List of Services considered outside the VAT framework

• Activities of international organizations, diplomatic bodies, foreign governments, and missions acting as such (if not in business in the UAE)
• Charitable activities carried out by societies and associations of public welfare listed by the Cabinet decision
• Activities and other non-profit organizations (not mentioned in the Cabinet decision) which are not business activities

List of Services whose VAT rate depends on service/good ignoring the provider

• Business activities are undertaken by the organizations mentioned above

13. Free Zones

List of Services and Supplies considered outside the VAT framework

• Supplies of goods between the business in designated zones

List of Services and Supplies whose VAT rate depends on services ignoring the location

• Supplies of services and goods in the non-designated zones
• Supplies of services between the businesses in designated zones
• Supplies of services and goods from the mainland to the designated zones or vice versa

14. Others

List of Supplies and Services under 5% VAT rate

• Any supplies of goods and services (includes any item that is sold in the UAE or service provided
• Second-hand goods (used vehicles sold by retailers), collector’s items, and antiques (5% of the profit margin)

List of Supplies and Services under 0% VAT rate

• Export of services and goods to outside the GCC Implementing States

List of Supplies and Services considered outside the VAT framework

• Activities carried out by the employees in the course of their employment (including salaries)
• Supplies between members of a single tax group

Are these VAT regulations confusing you? Do you want to outsource or avail VAT services like registration, consultancy services, VAT returns filing services, VAT Implementation services for your UAE-based establishment? Jaxa Chartered Accountants is your one-stop solution for your company’s Accounting, Taxation, Payroll, and other financial and legal needs. To have a word with our experts, contact us- we’d be happy to help.