UAE VAT Exemption

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By Julia | December 14th, 2017 | VAT


VAT in UAE: A Quick Guide to What’s Exempt and What’s Not

The VAT implementation in UAE is going to take place in another few days, and the government is trying its best to make the entire country well-informed about the latest regulations and tax framework. In a recent announcement, the Federal Tax Authority (FTA) has revealed the list of supplies across various sectors that are going to be subject to Value Added Tax (VAT) from the beginning of 2018. FTA has also disclosed the list of selected sectors that will be allocated zero-rated tax. The list of those selected sectors includes healthcare, education, oil and gas, real estate and transportation.

Some of the selected supplies in the sectors like real estate, financial services and transportation are going to be completely exempt from VAT. Interestingly, some of the government activities will be considered outside of the latest VAT system in the country, which means those activities won’t be subject to tax. This list of activities includes those that are undertaken solely by the government without any competition with the private sector and activities that are undertaken by the non-profit organizations.

The Cabinet of the UAE is expected to issue a Decision that will help identify the government bodies and non-profit organizations that are not subject to the latest VAT charges. The following tables give a complete outline of all the supplies that are subject to the 5% value added Tax, as well as supplies with zero-rated VAT and exempt VAT.

Education Sector  
Supplies VAT rates
Public and private school education (excluding higher education) and associated goods and services offered by the education institute. 0%
Higher education offered by Government-owned or Government-sponsored (50% funded) institutes and related goods and services. 0%
Education provided by the private higher education institutes, and associated goods and services. 5%
Pre-school education and nursery education 0%
School uniforms 5%
Stationery 5%
Electronic equipment (Laptops, tablets, projectors, etc.) 5%
Renting of school grounds for events 5%
Extra-curricular (after school) activities for extra fee 5%
After school activities provided by teachers without any extra charge 0%
School trips for educational purpose (within the curriculum) 0%
School trips for recreation or trips that aren’t mentioned in the curriculum 5%


Healthcare Sector  
Supplies VAT rates
Services for preventive healthcare including vaccination 0%
Healthcare services for treatment of humans (both medical and dental services) 0%
Other healthcare services that aren’t part of preventive, medical or dental treatment (elective, cosmetic etc.) 5%
Medicines and the medical equipment as mentioned in the Cabinet Decision 0%
Medicines and the medical equipment not listed in the Cabinet Decision 5%
Other medical supplies 5%


Oil and Gas  
Supplies VAT rates
Natural gas and crude oil 0%
Other products if gas and oil (including the petrol at the pump) 5%


Transportation Sector  
Supplies VAT rates
Transportation for domestic passengers (including the flights within UAE) Exempt
International transportation of passengers and goods (including intra-GCC flights) 0%
Supply of a means of transport (land, air or seas) for the commercial purpose of goods and passenger (more than 10 people) transportation. 0%
Supply of services and goods relating to these particular means of transport and the transportation of passengers and goods. 0%


Real Estate Sector  
Supplies VAT rates
Sales and rent of commercial buildings (not used for residential purpose) 5%
First sale/rent of residential building after finishing the construction or conversion 0%
First sale of building used for charitable causes 0%
Sale or rent of residential buildings following the first supply Exempt
Serviced accommodations like hotels, motels, etc. 5%
Bare land Exempt
Land (not considered bare land) 5%
Personal home owned by a UAE citizen 5% (recoverable)


Financial Services  
Supplies VAT rates
Products based on margin (products without an explicit fee, rebate, commission, discount or similar element) Exempt
Products having an explicit fee, commission, discount, rebate or similar element 5%
Interest on various forms of lending (e.g. loans, credit, finance leasing, and cards) Exempt
Issue, allotment or transfer of equity or debt security Exempt


Investment gold, silver and Platinum, Jewellry  
Supplies VAT rates
99% or purer and tradable in global markets 0%
Less than 99% pure 5%
Jewellery 5%


Insurance and Reinsurance  
Supplies VAT rates
Insurance and reinsurance (including property, motor, and health) 5%
Life insurance and life reinsurance Exempt


Food and beverages  
Supplies VAT rates
Food and beverages 5%


Telecommunications and other electronic services  
Supplies VAT rates
Wireless and wired telecommunications and electronic services 5%


Government Activities  
Supplies VAT rates
Sovereign activities that are not in competition with the private sector undertaken by designated government entities Considered outside VAT framework
Activities that are not considered sovereign or are in competition with the private sector VAT rates dependent on service/good ignoring provider


Non-profit Organizations  
Supplies VAT rates
Activities of international organizations, foreign governments, diplomatic bodies and missions acting as such (if not in business in the UAE) Considered outside VAT framework
Charitable activities carried out by societies and associations of public welfare that are listed by Cabinet Decision Considered outside VAT framework
Activities of other non-profit organizations (not mentioned in Cabinet Decision) that are not business activities Considered outside VAT framework
Business activities that are undertaken by the aforementioned organizations VAT rate dependent on service/good ignoring provider


Free Zones  
Supplies VAT rates
Supplies of goods between the business in designated zones Considered outside VAT framework
Supplies of services between the businesses in designated zones VAT rate dependent on service ignoring the location
Supplies of services and goods in the non-designated zones VAT rate dependent on service/good ignoring location
Supplies of services and goods from mainland to the designated zones or vice versa VAT rate dependent on service/good ignoring location


Supplies VAT rates
Export of services and goods to outside the GCC implementing states 0%
Activities carried out by the employees in the course of their employment, including salaries Considered outside VAT framework
Supplies between members of a single tax group Considered outside VAT framework
Any supplies of goods or services that are not mentioned above (includes any item that is sold in the UAE or service provided) 5%
Second-hand goods (used vehicles cold by retailers), collectors’ items and antiques 5% of the profit margin


Do the latest VAT regulations seem a bit confusing? Procure the necessary consultation and support on the latest VAT regulation from is one of the leading VAT consultancies in the UAE which offers adequate support to the businesses and individuals in the country and help them get acquainted with the latest regulations and tax provisions. There’s a team of professionals who can help anyone (even a layman) learn about the significant issues like VAT Registration, VAT implementation and VAT return filing services in the UAE. There are some industry stalwarts in the team who can provide valuable assistance in the matter of VAT implementations which concern one’s business operations and prevent him/her from making any rash decision.

Besides VAT consultations, the experts can provide several other services including accounting assistance, auditing support, company incorporation and tax advisory. They use state-of-the-art infrastructure to offer you the best in class services, and strive relentlessly to improve the quality of the services so that you get all the support from their end to grow your business seamlessly.

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