Under UAE VAT, the zero-rated supply is not just limited to exports/deemed exports as under Goods and Services Tax (“GST”) law in India. Zero-rated supplies are classified under taxable supplies which are 0% rated. Therefore, the same is to be included under the calculation of threshold limit for registration. Further, these supplies are to be separately reported in the VAT return against the zero-rated box (refer box 4 of VAT 201). Although, taxable person supplying only zero-rated supply may apply to FTA for exemption from registration. Such taxable person is not required to charge VAT on invoices. Example of such person could be exporters, real-estate developers, airlines, clinics, hospitals etc.
In this article, we are going to briefly understand the supplies covered under zero-rated supplies as classified under Article 45 of UAE VAT law:
The broad categories under which the zero-rated supply is classifiable: –
| Exports | Transportation | Metals | Buildings | Education Services | Healthcare Services |
Below are detailed list of goods/services covered under zero-rated supply: –
1. Direct/indirect export to outside the implementing state
Example: Supply of goods from Dubai to Australia
2. International transportation of goods/services that crosses the State
Supply of goods/services related to article 1 & 2 above for consumption or repair/installation
Example: Natural gas/Chocolate cubes loaded in England cross Dubai port for final destination at India. Further, where any goods/services are supplied for this transportation like repair tools etc. the same shall also be considered as exports
3. Transportation
(a) Air passenger transport in the State (international carriage)
(b) Supply of air, sea, and land means of transport for transportation of passenger and goods/services
- Supply of goods/services supplied for repair and maintenance of transportation (b) above
(c) Supply of aircrafts/vessels for rescue and assistance by air/sea
4. Investment in metals
- Supply of investment in precious metals
- Import of investment in precious metals
Note: As specified to be classifiable as investment in metals
5. First supply of buildings:
- Residential building within 3 years of completion by sale/lease in whole/part
- Buildings designed for charities by sale/lease
- Buildings converted from non-residential to residential through sale/lease
6. Supply of crude oil and natural gas
7. Education Services:
- Nurseries
- Pre-school
- School education
- Higher educational institution
8. Healthcare Services and its related goods/services
Example: Medical and dental services, room accommodation, meals for patients, prescription of drugs and certain medical equipment.
Conclusion: Zero-rate supply in UAE VAT law is a critical aspect of the tax regime, encompassing a wide array of goods and services that carry a 0% VAT rate. Understanding these provisions is essential for businesses and individuals operating in the UAE to ensure compliance and leverage the benefits of zero-rated supplies, especially in sectors like exports, transportation, metals, real estate, education, and healthcare. This article serves as a comprehensive guide to navigate the complexities of zero-rate supply within the UAE VAT framework.
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