What are the items which are exempt from VAT in UAE
VAT in UAE- What are the items which are exempt from VAT in UAE
Value-Added Tax or VAT is a tax on the consumption or use of goods and services levied at each point of sale. VAT is a form of indirect tax. A VAT is considered as an effective way to improve growth of a nation’s gross domestic product (GDP), raise tax revenue and eliminate government budget deficits.
Significance Of VAT in UAE
VAT was introduced in the UAE on 1 January 2018. The rate of VAT is 5 per cent.
VAT will provide the UAE with a new source of income which will be continued to be utilised to provide high-quality public services. It will also help government move towards its vision of reducing dependence on oil and other hydrocarbons as a source of revenue.
Threshold for registering for VAT
A business must register for VAT if its taxable supplies and imports exceeds AED 375,000 per annum.
It is optional for businesses whose supplies and imports exceed AED 187,500 per annum.
A business house pays the government the tax that it collects from the customers, but at the same time it receives a refund from the government on tax that it has paid to its suppliers.
Foreign businesses may also recover the VAT they incur when visiting the UAE.
Applicability for registering under VAT
VAT applies equally on tax-registered businesses managed on the UAE mainland and in the free zones. However, if the UAE Cabinet defines a certain free zone as a ‘designated zone’, it must be treated as outside the UAE for tax purposes. The transfer of goods between designated zones are tax-free.
Taxation – What are the items which are exempt from VAT in UAE
Taxation rate in UAE will be 5% on all goods and services. Government has decided upon the marginal rate of 5% in the interest of the residents, as purchasing power of the consumer will not be hampered to an extent. Thus implementation of VAT will not have adverse effect on the people who are on the lower end of the spectrum.
However GCC has agreed on three VAT rates that will levied by the member states at the time computation of tax:
- Standard Rate
- Zero Rate
- Tax Exempt
Standard Rate
The rate of 5% will be applied on the all the business sectors.(does not hold good for zero rated and exempted goods).It is mandatory that all invoices feature tax value separately and then be added to the final bill value. All invoices must also display VAT registration number to enable buyer to claim VAT credit.
Zero Rate- What are the items which are exempt from VAT in UAE
Zero rate, means that the goods are taxable but the rate of 0% VAT. Supplier needs to record any zero-rated supplies in the VAT account and report them in the tax return.
Registering under VAT for ZERO rated supply
A supplier, must register for VAT if the taxable turnover (which includes zero-rated supplies) exceeds Dh375,000 in a 12-month period, or if expected that taxable turnover (which includes zero-rated supplies) to exceed Dh375,000 in the next 30 days.
In the contrary a supplier can ask for an exception from registration if, and only if, supplier does not make any other supplies which are taxable at the standard rate of 5%. This means his supplies are only 0%. If exception from registration is granted, then the supplier will not submit regular tax returns and will not be able to recover input tax incurred.
Filing returns for supply of Zero rated supply.
If the supplier does not qualify for an exception from registration, then he must file tax returns with the FTA. He will be entitled to recover input tax incurred on business purchases subject to rules laid by FTA.
What are the items which are exempt from VAT in UAE
GCC List of Zero Rated Goods
- Exports outside GCC
- Food items as per GCC list
- Medicine and Medical Equipment as per GCC list
- Supply of sea, land and air means of transportation
- International and Intra GCC transport and services
- Charity organisations
- Gold, silver and platinum – 99% and more purity
- First supply after extraction of gold, silver and platinum
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.
UAE: Additionally:
Additionally, each member state can zero rate or VAT-exempt:
- The educational sector
- The medical sector
- The real estate sector
- The local transport sector
Bullet Points
- As a supplier, you must register for VAT if your taxable turnover (which includes zero-rated supplies) exceeds Dh375,000 in a 12-month period, or if you expect your taxable turnover (which includes zero-rated supplies) to exceed Dh375,000 in the next 30 days.
- However, you can ask for an exception from registration if, and only if, you do not make any other supplies which are taxable at the standard rate of 5%. If exception from registration is granted, then you will not submit regular tax returns and you will not be able to recover input tax incurred.
- If you do not qualify for an exception from registration, then you must file tax returns with the FTA. You will also be entitled to recover input tax incurred on business purchases subject to the normal conditions.
- Registrants who could be suppliers of zero-rated services and goods include exporters, real estate developers, airlines, schools, clinics, hospitals, etc.
Exempt Supply
Exempt supplies are those supplies that are not taxable under VAT. As VAT is not charged on exempt supplies the supplier cannot claim any input tax credit on expenses incurred in making those exempt supplies. Exemptions will also be strictly applied as they are an exception to the normal rule that VAT should be charged.
Registration under VAT for exempt supplies.
If all the supplies made are exempt, then the necessity to register for VAT does not exist. In such a case, there is no recovery of tax incurred on business purchases. Examples of such would be owners of property who rent their properties for residential purposes.
What are the items which are exempt from VAT in UAE
- Financial services including life insurance and reinsurance of life insurance as well as financial services that are not conducted for an explicit fee, discount, commission, rebate or similar type of consideration.
- Residential buildings, other than the residential buildings which are specifically zero-rated.
- Bare land.
- Local passenger transport.
VAT for Designated Zone in UAE– What are the items which are exempt from VAT in UAE
Designated Zone is a VAT free Zone which is considered to be outside the State of UAE for the purpose of VAT. Therefore any transfer of goods between Designated Zones,VAT will be not be levied.
VAT for supply of Goods related to Designated Zones
As per FTA with regards to VAT, the Designated Zones are considered to be outside the State of UAE, meaning VAT will not be levied. Though it is treated as outside the State, some supplies will be charged for VAT at 5%. As, only the supply of goods will be tax-free subject to certain conditions and depending upon the place of supply, few type of supplies made from or to the Designated Zone will be taxable.
VAT applicability on supplies made from/to the Designated Zones- What are the items which are exempt from VAT in UAE
| Type of Supplies | Form | To | Taxability |
| Goods | Designated Zone | Designated Zone | Non-Taxable |
| Goods | Designated Zone | UAE except the Designated Zones | 5% VAT |
| Goods | UAE except the Designated Zones | Designated Zone | 5% VAT |
| Goods | Designated Zone | Oversea/GCC countries | Non-Taxable |
| Goods | Oversea/GCC countries | Designated Zone | Non-Taxable |
As mentioned in the above table, any movement of goods from a Designated Zone to another will not be subject to tax only if the conditions mentioned in UAE Executive Regulations are met.
Conditions for VAT free supply of goods between Designated Zones
Supplies between the Designated Zones will not be subject to VAT only if the following conditions are met:
- The Goods are not released during transfer between the Designated Zones
- Goods are not in any way used or altered during the transfer between the Designated Zones.
- The transfer of goods is undertaken in accordance with the rules for customs suspension according to GCC Common Customs Law.
Federal Tax Authority lists free zones across the seven emirates.
The Federal Tax Authority announced 20 designated zones which would be exempt from the recently-implemented five per cent VAT in the country, bringing a major relief and clarity for the companies operating in the free zones.
List of Designated Zone in UAE– What are the items which are exempt from VAT in UAE
| Emirate | Designated Zone |
| Abu Dhabi | Free Trade Zone of Khalifa Port |
| Abu Dhabi Airport Free Zone | |
| Khalifa Industrial Zone | |
| Dubai | Jebel Ali Free Zone (North-South) |
| Dubai Cars and Automotive Zone (DUCAMZ) | |
| Dubai Textile City | |
| Free Zone Area in Al Quoz | |
| Free Zone Area in Al Qusais | |
| Dubai Aviation City | |
| Dubai Airport Free Zone | |
| Sharjah | Hamriyah Free Zone |
| Sharjah Airport International Free Zone | |
| Ajman | Ajman Free Zone |
| Umm Al Quwain | Umm Al Quwain Free Trade Zone in Ahmed Bin Rashid Port |
| Umm Al Quwain Free Trade Zone on Sheikh Mohammed Bin Zayed Road | |
| Ras Al Khaimah | RAK Free Trade Zone |
| RAK Maritime City Free Zone | |
| RAK Airport Free Zone | |
| Fujairah | Fujairah Free Zone |
| FOIZ (Fujairah Oil Industry Zone) |
Tax Table
As per FTA The below table outlines all services and supplies that is subject to the 5% Value Added Tax, as well as zero-rated supplies and exempt supplies
VAT Treatment on below broad headings- What are the items which are exempt from VAT in UAE
| Education VAT rate | VAT rate |
| Private and public school education (excluding higher education) and related goods and services provided by education institution | 0% |
| Higher education provided by institution owned by government or 50% funded by government, and related goods and services | 0% |
| Education provided by private higher educational institutions, and related goods and services | 5% |
| Nursery education and pre-school education | 0% |
| School uniforms | 5% |
| Stationery | 5% |
| Electronic equipment (tablets, laptops, etc.) | 5% |
| Renting of school grounds for events | 5% |
| After school activities for extra fee | 5% |
| After school activities supplied by teachers and not for extra charge | 0% |
| School trips where purpose is educational and within curriculum | 0% |
| School trips for recreation or not within curriculum | 5% |
| Healthcare | VAT rate |
| Preventive healthcare services including vaccinations | 0% |
| Healthcare services aimed at treatment of humans including medical services and dental services | 0% |
| Other healthcare services that are not for treatment and are not preventive (e.g. elective, cosmetic, etc) | 5% |
| Medicines and medical equipment as listed in Cabinet Decision | 0% |
| Medicines and medical equipment not listed in Cabinet Decision | 5% |
| Other medical supplies | 5% |
| Oil and Gas | VAT rate |
| Crude oil and natural gas | 0% |
| Other oil and gas products including petrol at the pump | 5% |
| Transportation | VAT rate |
| Domestic passenger transportation (including flights within UAE) | Exempt |
| International transportation of passengers and goods (including intra-GCC) | 0% |
| Supply of a means of transport (air, sea and land) for the commercial transportation of goods and passengers (over 10 people) | 0% |
| Supply of goods and services relating to these means of transport and to the transportation of goods and passengers | 0% |
| Real estate | VAT rate |
| Sale and rent of commercial buildings (not residential buildings) | 5% |
| First sale/rent of residential building after completion of construction or conversion | 0% |
| First sale of charitable building | 0% |
| Sale/rent of residential buildings subsequent to first supply | Exempt |
| Hotels, motels and serviced accommodation | 5% |
| Bare land | Exempt |
| Land (not bare land) | 5% |
| UAE citizen building own home | 5% (recoverable) |
| Financial services | VAT rate |
| Margin based products (products not having an explicit fee, commission, rebate, discount or similar) | Exempt |
| Products with an explicit fee, commission, rebate, discount or similar | 5% |
| Interest on forms of lending (including loans, credit cards, finance leasing) | Exempt |
| Issue, allotment or transfer of an equity or debt security | Exempt |
| Investment gold, silver and platinum, jewellery | VAT rate |
| ≥99% pure and tradable in global markets | 0% |
| <99% pure | 5% |
| Jewellery | 5% |
| Insurance and Reinsurance | VAT rate |
| Insurance and reinsurance (including health, motor, property, etc) | 5% |
| Life insurance and life reinsurance | Exempt |
| Food & Beverages | VAT rate |
| Food and beverages | 5% |
| Telecommunications and electronic services | VAT rate |
| Wired and wireless telecommunications and electronic services | 5% |
| Government activities | VAT rate |
| Sovereign activities which are not in competition with the private sector undertaken by designated government bodies | Considered outside VAT system |
| Activities that are not sovereign or are in competition with the private sector | VAT rate dependent on good/service ignoring provider |
| Not for Profit Organizations | VAT rate |
| Activities of foreign governments, international organisations, diplomatic bodies and missions acting as such (if not in business in the UAE) | Considered outside VAT system |
| Charitable activities undertaken by societies and associations of public welfare which are listed by Cabinet Decision | Considered outside VAT system |
| Activities of other not for profit organizations (not listed in Cabinet Decision) which are not business activities | Considered outside VAT system |
| Business activities undertaken by the above organizations | VAT rate dependent on good/service ignoring provider |
| Free zones | VAT rate |
| Supplies of goods between businesses in designated zones | Considered outside VAT system |
| Supplies of services between businesses in designated zones | VAT rate dependent on service ignoring location |
| Supplies of goods and services in non-designated zones | VAT rate dependent on good/service ignoring location |
| Supplies of goods and services from mainland to designated zones or designated zones to mainland | VAT rate dependent on good/service ignoring location |
| Other | VAT rate |
| Export of goods and services to outside the GCC implementing states | 0% |
| Activities undertaken by employees in the course of their employment, including salaries | Considered outside VAT system |
| Supplies between members of a single tax group | Considered outside VAT system |
| Any supplies of services or goods not mentioned above (includes any items sold in the UAE or service provided) | 5% |
| Second hand goods (e.g. used cars sold by retailers), antiques and collectors’ items | 5% of the profit margin |
Reach Accountant Online VAT Accounting Software
It is very essential that businesses use a software which will enable the task of maintaining records and managing accounts efficient. Businesses should carefully evaluate and decide a software which will help them in maintaining systematic and error-free accounts and records with compliance validation. The business software should be their instrument for compliance under VAT while helping them maintain their focus on the core business activities.
Need to upgrade to Reach Online VAT Accounting Software :
Reach Accountant software is well designed to match all the needs for successful running of the business. The software can be used in different industries ,traders ,manufacturers, retailers, workshop ,business projects etc. It is an online VAT accounting software that can automatically manage your book of accounts, taxes, inventory, sales, purchases and more online quickly and securely.
Benefits Of Reach Online VAT Accounting Software
Reach Online accounting software systems are rapidly evolving, giving business owners the ability to choose how and where they manage their finances. Whether at home or on-the-go, business owners are now able to execute administrative functions such as instantly viewing bank balances, tracking expenses, sending invoices ,supervising the work flow of branches through Reach online VAT Accounting Software thus making business more viable.There are many advantages of using an online accounting system including:
Reach online VAT accounting system can help you manage your business by improving your recordkeeping processes and give you the tools you need to analyze business results and make sound financial decisions.
- Online Access 24/7
- Cost
- User Friendly
- Technical Support
- Efficiency
- Analysis –
- Security and Accuracy
- Inter Connectivity of Branches:
- Opportunities
- Scalability
Top Features of the Reach Online VAT Accounting Software are:
- Accounting Management: All functions relating to accounts are inbuilt with the software. You can manage your Accounting Ledgers, Bank & Cash Operations, Purchase & Sales Estimates, Warehouse Allocations, Expense Recording, Expense Grouping, Payments – Part or Full, Journal Entries, Income and loss a/c, Balance sheets, Receipts – Part or Full, Contra Entries, Financial Reports, Day book.
- Tax Management: Our accounting Software automatically calculates the taxes relevant for every bill created. The Software is designed as per the government norms for calculation of VAT. It also has the option to add any number of taxes relevant to the business. In case of change in tax percentages a change it in the software on your own. All you have to do is add your tax percentage and our software will calculate the taxes automatically. This multiple tax scheme can also be applied to multiple products on a single purchase.
- Income Management: The Company can create Quotations then the same can be converted as a Sales order or Pro-forma invoice or Invoice. From Invoice you can create Receipts as well. Accountants will be able to know what payments have been received and what are pending in the reports. You can also set reminders for receiving payments.
- Expense Management: You can create Purchase Orders then the same can be converted as bill or payments. You can also create Debit notes for purchase returns. Accountants will be able to know which purchase bills have been paid and which are pending in the reports. You can also set reminders for making payments.
- Invoicing: Generates VAT compliant invoice of the company in the specified design as requested by the client or can choose from the available templates in the software. It also converts quotes to invoice .One of the features is the software can convert the Foreign currency invoices to base currency and further calculating the VAT at UAE standard rate.
· Print Tax Invoice In Arabic: Reach software lets you print invoices in Arabic, English or both, as per the mandated guidelines of GAZT and FTA.
- Auditor View: Full-fledged Financial reports, Tax reports VAT reports, read process by auditor, with e-filing options, PF & ESI Reports, Tax Consulting Modules are some to be named.
- Check Post for VAT returns: As the software has been designed exclusively to aid individuals and entities to be VAT compliant in UAE, the set of rules and regulation laid by FTA (Federal Tax Authority) of UAE are embedded in the software. Hence any process error will be popped up by the application can be viewed .For instance wrong Tax Registration Number, incorrect taxable figure, wrong taxation period.
- Automatic Update on Tax legal Sections: As the Reach software are cloud computed software gets upgraded to update any revised tax laws and section if any in future.
- Computation Of VAT Returns: The software is inbuilt with all the detailed crucial information on tax computation Tax Assesee can fetch all the details of all the taxable transactions It lists down transactions which are included and excluded in the VAT return calculate input tax, reverse charge and output tax to avail claim if any
- Filing Of VAT Returns: The registered businesses in UAE are required to generate the VAT return File from their accounting software, login to the FTA’s e-tax portal and upload the return file. On the basis of the uploaded return file, the e-tax portal will validate the file and accordingly the details from the file will be auto-populated in the online return form. Reach VAT software is designed to ease the process of filing returns and comes under the purview of FTA prescribed set of rules and regulations.
- * VAT Reports etc.
- Calculate VAT automatically.
- VAT support in Sales, Purchase, Sales and Purchase returns, Journal entries.
- Generate Federal Tax Authority compatible tax reports.
- VAT Paid (charged by suppliers) and Vat Collection (Charged to customers) Analysis.
- Transaction wise details of VAT paid and VAT collected.
- Attach every Vendors/Customers VAT number and other details.
- VAT supported for Goods (stocked) and Service (non-stocked) items.
- Online application accounting.
- VAT Account Reconciliation, VAT Collection & VAT Paid analysis report.
- Report export to excel and other standard formats.
- VAT returns statement compatible with Federal Tax Authority standards.
Online accounting VAT software enables you to file vat returns, manage accounts and other business operations from any geographical area be it at the comfort of the house.
- Receipt: Receipts can either be manually entered or imported it in excel format easily.
- Payments: Payments can either be manually entered or imported it in excel format easily.
- Multi Company: Manage business through comfort of the smart phone.
- Tally Import: Tally files can be easily imported to Reach Software of various periods and manage business easily.
- Auditor’s Report: Full Financial Report are available,Read process by Auditor,Tax Reports,VAT Report with e-filing options,PF & ESI Reports,Tax Consulting Modules are some featuress mentioned.
- Mobile Application: Access business information through tabs and android smart phones, pick photos of expense vouchers and attach to expenses, daily profitability and other key reports can be viewed on phone.
- Bank Synchronization: Bank Statements can be imported in to Reach software through excel files.
- Security: There is complete security of data stored in the hard disk. Data can be accessed and control by creating access restriction. One time password facilities also ensures a check in the log in to the website.
- Run Business from anywhere: The business can be run access data from anywhere at your comfort. Just like checking mails from the laptop or systems.
- Free and Automatic Upgrades: At Reach Accountant you will be provided free services of upgrading the software frequently with new features and use it absolutely free.
- No investment in expensive hardware: The software is browser based. It just requires internet connection which can be connected to multi computers without using LAN and servers.
- API: The client can integrate the existing software with Reach accounting application ,
- Automatic Data Backup: Reach stores all the data in servers offsite with regular backups. Hence business information is safe and secure
· User Interface & Complexity:The software is designed to make its use friendly and easy,no cumbersome process to operate the application and software.
- Scalability:It is an VAT accounting software which can scale with your business needs. . Some software companies offer only one version of the product and some have progressive versions depending the business type or size. Reach Accounting software offers both integrated an entry level version as well as a feature rich version which you might not need for the current business processing but will definitely need in future for business development.
Top Two Features of the Reach Accounting Software
- Outsourced Accounting: The software enables to finish the outsourced accounts in less than 30 minutes.
- Real Time Accounting: Allows client to record sales and purchases online, while finalizing accounts that is checking the Audit trail, providing MIS reports, checking Tax reports, printing financial reports and filing taxes.
Technology Used
Reach has implemented the latest technology Cloud Computing to handle day to day business transactions just a click away from your browser from any part of the world.
Cloud accounting software that is easily accessed online and an attractive option for large or small business owners. Companies that use cloud accounting require less initial server infrastructure to store data and don’t require IT staff to maintain or update the cloud accounting system. Get the spectacular benefits of cloud accounting as you seamlessly integrate with the powerhouse
Benefits of cloud accounting:
- Streamline billing and ordering processes
- Capture and store financial data to most accurately model and report on your finances
- Use Chatter to enable more effective collaboration across your organization
- Greater return on investment and real-time, multi-dimensional financial analysis
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