Suppliers need to understand what items are exempt from VAT in the UAE as VAT implementation continues.
Three weeks into the New Year and with the VAT implementation proceeding smoothly, some confusion still exists as to which supplies are exempt from VAT in the UAE.
Similarly, suppliers need to clearly display the amount of VAT payable on their client invoices even if the VAT amount is zero.
Here is a quick clarification on what goods and services are exempt from the VAT in the UAE, together with some quick tips on how to adjust your price accordingly.
Exempt Supplies Defined
Exempt supplies are not taxable supplies for VAT purposes. VAT is not charged on exempt supplies and the supplier cannot recover any VAT 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.
VAT Exempt & Zero-Rated Supplies
Supplies subject to a zero rate are listed in Article 45 of the Federal Decree-Law no. (8) of 2017 on Value Added Tax. The following items are exempt from VAT:
- Residential rents
- Bare land
- Local transport
- Air travel
Do Suppliers Of Exempt And Zero-Rated Supplies Charge VAT?
Suppliers do not charge tax on a zero-rated or exempt supply.
How To Charge: What Your VAT Invoice Should Show
A VAT invoice for supply should show the following line items:
- “Tax invoice” in a prominent place
- Name, address & TRN of supplier
- Date of issue
- Description of goods or services
- Total amount payable
- Total VAT chargeable
Remember, if you are not registered, you cannot charge VAT.
If I Make Supplies Exempt From VAT In The UAE, Do I Need To Register?
As a supplier, you must register for VAT with the Federal Tax Authority (FTA) if your taxable turnover including zero-rated supplies exceeds Dh 375,000 in a 12-month period, or if you expect your taxable turnover to exceed Dh375,000 in the next 30 days.
However, you can ask for an exception from registration if you do not make any other supplies, which are taxable at the standard rate of 5 percent. If an exception from registration is granted, then you will not have to submit regular tax returns. However, you will also not be able to recover VAT-related input tax incurred.
Do I Need To File Returns If I Only Supply Exempt Or Zero-Rated Supplies?
If you do not qualify for an exception from the VAT 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.
Gain A Complete Understanding Of What VAT Is And How It Will Impact Small Businesses In The UAE On A Day-To-Day Basis Today!
Our free Guide To VAT In The UAE can help you ensure your business is VAT compliant.
With the new VAT beginning to settle in, the issue of exempt or zero-rated supplies remains an area of confusion. If you supply supplies exempt from the VAT in the UAE you need to clearly show AED 0.00 is the VAT line, and remember, if you are not registered, you cannot charge VAT.