Pay zero VAT on these goods, services in the UAE

The 5 per cent tax is set to be imposed on the import and supply of goods and services at each stage of production and distribution.

The President, His Highness Sheikh Khalifa bin Zayed Al Nahyan, on Sunday issued the Federal Decree-Law No. 8 of 2017 for Value-Added Tax, with one of the lowest rates in the world.

A preliminary step to implementing VAT in the UAE as of January 2018, the 5 per cent tax is set to be imposed on the import and supply of goods and services at each stage of production and distribution, including what is deemed to be a supply.

However, there are certain conditions when zero VAT will be applied.

What are zero rates?
Zero-rating applies when goods and services are being exported to outside a VAT-implementing GCC state, as well as to international transportation of passengers or goods including a transfer starting or ending in the UAE or passing through its territory.

Air transfer of passengers in in the UAE also incurs zero rates if it is considered an "international carriage" as per article (1) of the Warsaw International Convention for the Unification of Certain Rules Relating to International Carriage by Air 1929.

Zero rating also applies to the supply of air, sea and land means of transport used to transport passengers and goods, as well as the supply of goods and services related to the supply of the means of transport, which are for operating, repairing, maintaining or converting them; the supply of aircrafts or vessels designated for use in the assistance or rescue by air or sea; the supply of goods and services related to the transfer of goods or passengers aboard land, air or sea means of transport, designated for consumption on board; or anything consumed by means of transportation, any installations or addition thereto or any other uses during transportation.

The supply or import of investment-precious metals, as well as the first supply of residential buildings within (3) years of its completion, either through sale or lease in whole or in part, is equally subject to a zero-rate. The first supply of buildings specifically designed to be used by charities and buildings converted from non-residential to residential shall also be taxable at the rate of zero.

Also subject to the zero rate is the supply of educational services and related goods and services for nurseries, preschool, elementary education, as well as higher educational institutions owned or funded by the Federal or local government, as specified in the Executive Regulation; and, finally, the supply of preventive and basic healthcare services and related goods and services, as specified in the Executive Regulation.

The Decree-Law outlines that certain supplies shall be exempt from tax, namely: the supply of certain financial services as specified in the Executive Regulation, the supply of residential (non-zero-rated) buildings either by sale or lease, the supply of bare land, and the supply of local passenger transport.

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