With the implementation of VAT proceedings, the region of UAE has figured out new ways of generating revenue. The concept of VAT holds the specific term “Zero-rate” is used in countries where Value Added Tax (VAT) gets implemented. In business terms, zero-rate means that the good or service involves GST/VAT, but the rate that gets applied is 0%. This is an essential part that every business professional or entrepreneur in UAE should be aware of.
According to the United Arab Emirates Federal Tax Law: “The Export of goods and services outside the GCC and international transportation are zero-rated. They must be reported in tax returns, but no VAT will apply.”. This guide will help you to understand the conditions for zero-rating export of goods in the UAE.
Zero-Rated of Goods
Zero-rated goods are individualized items that are considered to be taxable but are charged at 0%. According to Article 45 of the Federal Decree-Law No. (8) of 2017 of Value Added Tax, the below items are taken into consideration:
- Export of goods and services
- International transport of goods and passengers
- Means of Transportation like trains, trams, vessels, airplanes
- First sale/rent of residential buildings
- Aircraft or vessels designated for rescue and assistance by air or sea
- An investment made on precious metals
- Goods related to health-care services
- Goods related to educational services
According to Article 46 of the Federal Decree-Law No. (8) of 2017 of Value Added Tax (VAT), the following goods are exempted:
- Financial services
- Life insurance and reinsurance
- Residential buildings
- Bare land
- Local passenger transport
Conditions for Zero-Rated of Goods
- The proceedings of Direct Export will be applicable to the zero-rate if the below conditions are met accordingly:
- The Goods are exported to a place outside the states, where the GCC Common Customs Law implements it and takes place within 90 days from the date of supply.
- There should be official and commercial evidence of Export or customs suspension is retained by the exporter.
- The proceedings of Indirect Export get applicable the zero-rate if the following conditions are met accordingly:
- The relevant goods are physically exported to a place outside the implementing states or are put into the customs suspension regime, within 90 days from the date of supply.
- The Overseas customer obtains official and commercial evidence of Export or custom suspension following the GCC Custom Law and subsequently issues a copy to the supplier.
- The Goods are nor used or altered in the time between supply and export of custom suspension.
- The Goods do not leave the state in possession of a passenger or crew member of an aircraft or ship.
- The movement or supply of goods into a Designated Zone from a place in the State shall not be considered an export activity.
It is to be noted that although the Zero-Rated VAT and Exempted VAT sound similar, there exists a vast difference between the two. To understand the differentiation in a much better way, click here.
Dealing with the Tax and VAT proceedings turns out to be complicated if proceeded without any in-depth or even half knowledge as it will have a drastic impact on the business books. To carry out the proceedings at ease, the business professionals prefer to go ahead with Tax experts who can help the business manage the business records efficiently and guide the team towards zero-rating and other concepts like Tax Group, External Audit process, etc. Additionally, an expert can provide you with the following leverages:
- Sort the business books in a smooth way
- Faster process
- Manage error-free business books and records
- Better utilization of available resources
JAXA Chartered Accountants is one of the top accounting firms in the UAE, which has been providing audit, accounting, and tax services to numerous clients in the region. Our tax experts hold the solution to your queries and are known for delivering customized solutions. In case you own any question, do speak to our advisors. Contact us today-we’d be glad to assist.