Maintain your tax compliance through Filings.ae platform at an affordable price. Get support from Experienced Accountants for bookkeeping, financial statement preparation, VAT and Corporate Tax filing.
Maintain your tax compliance through Filings.ae platform at an affordable price. Get support from Experienced Accountants for bookkeeping, financial statement preparation, VAT and Corporate Tax filing.
Maintain your tax compliance through Filings.ae platform at an affordable price. Get support from Experienced Accountants for bookkeeping, financial statement preparation, VAT and Corporate Tax filing.
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Manage your business and track services |
Manage your business and track services |
Understanding Value Added Tax (VAT) applicability on various supplies in the United Arab Emirates (UAE) is crucial for businesses operating within the country. Introduced in 2018, VAT plays a significant role in government revenue generation and necessitates proper compliance by registered businesses. The types of supply under UAE VAT are broadly classified into four: Taxable supplies, Zero-rated supplies, Exempt supplies, and out-of-scope supplies. This article focuses on the VAT applicability of the different types of supplies in the UAE.
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VAT is an indirect tax levied on the consumption of most goods and services. In the UAE, the standard VAT rate is 5%. A registered business selling taxable goods or services within the UAE must charge VAT on the selling price. This collected VAT (output tax) must be reported and remitted to the Federal Tax Authority (FTA). Conversely, a registered business can claim input tax, the VAT paid on purchases of goods and services for making taxable supplies. This mechanism ensures businesses only bear the net VAT cost.
UAE VAT classifies supplies into four main categories:
Here, the table captures the types of supplies under UAE VAT,
Category | Description | VAT Rate | Example Supplies |
Taxable Supplies | Goods and services are subject to VAT at the standard rate of 5%. | 5% |
|
Zero-Rated Supplies | Goods and services with a VAT rate of 0%. Input tax on purchases can be recovered. | 0% |
|
Exempt Supplies | Goods and services are not subject to VAT. Businesses do not charge VAT and cannot recover input tax. | Not Applicable |
|
Out-of-Scope Supplies | Supplies not considered under the UAE VAT system. Typically, overseas suppliers or non-registered businesses provide goods or services to someone outside the UAE. | Not Applicable | Digital service by a non-registered US company to a customer in India |
Learn more: Difference between Zero-rated and Exempt Supplies in UAE
Businesses operating in the UAE must be familiar with the four main VAT supply categories (taxable, zero-rated, exempt, and out-of-scope) and their corresponding VAT treatment (5%, 0%, or not applicable) to ensure proper VAT compliance and avoid potential penalties. This knowledge is critical for businesses to accurately charge VAT on taxable supplies, claim input tax on relevant purchases, and navigate VAT requirements for different types of transactions.
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