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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

Zero-Rate Supply

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

  1. 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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