VAT: ZERO-RATED VAT vs EXEMPTED VAT
VAT implementation is into effect from January 1, 2018. UAE
VAT is a charge borne by the final customer. The general rule of VAT law is
that the supplier has to account for VAT. The closing price of the transaction
is inclusive of VAT.
There are two major terminology in VAT (Value Added Tax)
“Zero-Rated VAT” and “Exempted VAT”.
What is Zero-Rated
VAT?
Any goods and services that are exported to a gulf
cooperation (GCC) country that doesn`t implemented VAT just yet. This includes
international transportation of passengers and goods, transfer that starts in UAE
or ends in UAE or cross any region of UAE.
Simply, Zero Rated VAT means that supply of goods and
services that are taxable but 0% VAT is imposed.
VAT registered business that makes Zero-Rated supplies or
services have the right to claim their input tax deduction that they have
obtained for producing taxable supplies.
The price of goods are reduced when Zero-Rated VAT is
imposed.
What is Exempted VAT?
Goods on which tax is not imposed by the government and
suppliers cannot claim/ recover credits for any VAT expenses incurred in making
of these goods.
VAT exemptions/exemptions sometimes can be the cause of rise
in prices. Due to this government uses exempted VAT for the goods or services
where it is difficult to define, such as financial services.
Difference between
Zero-Rated VAT and exempted VAT
Zero-Rated VAT means 0% VAT is applied to goods or services
and allows the businessmen/supplier to claim the VAT expenses incurred in
making of these goods. on the other hand exempted VAT means that no VAT is
applied on the goods and services.
14 Zero-Rated VAT
Goods and Services listed in Article 45 of federal decree law of 2017 are as
follows:
(a) Direct or Indirect Exports
(b) International Transport (international airfares)
(c) Air Passenger Transport;
(d) Supply of transport for passengers and goods using air,
sea, and land means;
(e) Goods and services supply for the purpose of the
operation, repair, maintenance, or conversion of those means of transport;
(f) Aircraft and Vessels for Rescue,
(g) Supply of Goods and Services Related to the Transfer of
Passengers or Goods
(h) Investment in Precious Metal
(i) Sale of the Residential Building
(j) Charitable Building Supplies
(k) First Supply for Residential Building
(l) Oil and Gas, which is crude oil and natural gas
(m) Educational Services
(n) Healthcare Services
Exempted VAT Goods
and Services listed in Article 46 of federal decree law of 2017 are as follows:
(a) Financial services;
(b) Supply of residential buildings through lease or sale
(c) Supply of bare land
(d) Supply of local passenger transport.
Alkhadim LLC is a regulated Tax Agent in Dubai and UAE
that offers VAT consultancy services in Dubai and UAE.
Our team is specialized in providing followings services:
- VAT Registration or Implementation
- Preparation of TAX returns
- Taxation and Return filling services
- Advisory activities and
representation on behalf of client before tax authorities
- Provide proper training to the staffs with respect to taxation.
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