The zero-rated supply in the UAE’s value-added tax refers to taxable supplies, and the value-added tax is charged at zero rate. Here, regardless of the goods or services provided or the specific goods or services listed under the zero-rate list, taxes are levied at zero-rate according to the nature of the supply.
Generally, all exports of goods and services from the UAE will be treated as zero rated supply. However, in order to make the supplies have zero tax rate, the UAE administrative regulations stipulate some conditions, which require a zero tax rate tax.
List of zero-rated VAT goods and services in the UAE
The following is a list of zero-rated VAT goods and services in the UAE. However, as mentioned earlier, to treat the following consumables as zero-rated consumables, they need to meet the conditions mentioned in the UAE’s enforcement regulations.
1. All direct and indirect exports of goods and services to countries other than the implementing country
2. Export telecommunications services
3. International transportation services for passengers and goods, including all other transportation-related services
4. Supply or import investment precious metals, such as gold, silver and platinum, the purity of which is 99% or higher, and the form of the metal can be traded on the global gold and silver market
5. Residential buildings designed for human occupation, including accommodation for students or students, armed forces and police, orphanages, nursing homes and rest homes
6. Buildings designed for charity use
7. Educational services
8. Health care services
What is the difference between zero-rated supply and duty-free supply in the UAE VAT?
The above problem becomes obvious because the end result of zero-rated supplies and duty-free supplies is the same, that is, no VAT is charged on supplies.
Although the value-added tax rate is zero, they are treated differently when deducting the input tax credit (ITC). When purchasing goods or services provided in the form of zero-rated supply, you can use the value-added tax paid as ITC and offset your output liabilities. If it is a duty-free supply, you will not be able to claim ITC for the amount of VAT purchased.
In addition, you may want the details of zero VAT supplies and tax-free supplies to be reported separately in the VAT return. The VAT refund format is not yet available.
Therefore, it is very important for companies to understand zero-rated supply and understand the difference between zero-rated supply and tax-free supply, because the reasons for not charging VAT in each case are different. This will help companies accurately declare ITC and submit VAT returns.