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The UAE implemented Value Added Tax (VAT) in 2018. It's a consumption tax levied on most goods and services. The VAT rate is a percentage of the price added by the seller and collected from the customer. The standard Value added tax (VAT) rate in the UAE is 5%, with some exceptions for zero-rated and exempt goods and services. This article explores the VAT rates in the UAE and explains the terms involved to understand the UAE VAT system better.
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The table below shows the "VAT rates in UAE" classification, with its equivalent input tax recovery and examples.
VAT rate structure in UAE | |||
Rate type | Tax rate | Input tax recovery | Examples |
Standard rate | 5% | Yes | Electronics, clothing, restaurant meals |
Zero-rated supplies | 0% | Yes | Exports of goods, basic medical services |
Exempt-supplies | N/A | No | Financial services, local public transport |
Letâ??s understand each term in the following sections.
The standard VAT rate in the UAE is 5%. This applies to most goods and services you encounter daily, such as electronics, clothing, restaurant meals, salon services, and utility bills. Apart from Zero-rated supplies, VAT is levied on all taxable supplies.
Zero-rated supplies are essentially taxable, but the VAT rate is 0%. This means no VAT is added to the price. However, businesses making zero-rated supplies can still claim input tax credits, benefitting cash flow management. The following categories come under VAT zero-rated supplies in the UAE. Each category should meet the specific rate to get a zero-rated applicability for the supplies.
VAT-exempt supplies are not considered taxable and are entirely outside the scope of VAT. This means no VAT is charged on these supplies, and businesses making exempt supplies cannot claim input tax credits for VAT paid on related expenses.
The key difference between zero-rated and exempt supplies is whether the supply is considered taxable or not. Zero-rated supplies are technically taxable with a 0% VAT rate, while exempt supplies are not taxable.
Follow these simple step-by-step processes to calculate VAT in the UAE,
To learn the detailed procedure: VAT calculation in UAE
This article explained the different VAT rates (standard, zero-rated, exempt) in the UAE. Understanding these rates helps determine the VAT you pay on goods and services, ensuring you comply with regulations and manage your finances effectively. Remember, Filings.ae can assist with VAT calculations and filing!
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