While introducing the VAT in the UAE the government has given four kinds for supplies: zero-rate, the standard rating of 5%, and out-of-scope supplies. VAT consultants in Dubai have witnessed taxpayers being confused to differentiate between the zero-rated, the standard, out of scope, and exempted.
Making a difference between types of VAT ratings is crucial as the value of each supply should be labeled in the VAT return. You can get the assistance of tax agents in Dubai to understand the rating your company makes of the taxable supplies. Further details are ahead in this blog. Keep reading to understand the types of VAT rates.
Standard-Rated Supplies Of VAT
According to the VAT regulations in the UAE, standard supplies are those charged with a 5% tax. The standard rating applies to all the supplies being traded on the mainland where the receipt and the supplier are located in the UAE.
The mainland can be defined as any place which is not a designated zone for VAT purposes. Consult ebs for more clarification on this subject.
Consider the following instances to understand standard-rated VAT in a better way.
- A sale between a receipt and a supplier both of whom are located on the mainland, given the services or goods are also incurred in the UAE mainland.
- A supply of goods transferred from the mainland to a designated zone in the UAE.
- Supply of all services in the UAE as a whole including the transfer of services within the same designated zone.
Zero-Rated Supplies Of VAT
Zero-rated supplies are supplies that are not rated 5% but 0%. Zero-rated supplies under the VAT must be declared in the VAT returns during the tax period. The following supplies are zero-rated VAT supplies in the UAE:
- Supply of associated goods and services, and education services.
- Supply of precious metals that are 99% pure and also available in the tradable form.
- First supply of new residential properties that are being constructed.
- Supply of certain healthcare services.
- First supply of buildings that are converted from non-residential to residential through lease or sale.
- First supply of a charitable building.
- Export of goods and services.
- Supply of natural gas and crude oil.
- Supply of vessels and aircraft designated for assistance and rescue by sea or air.
Exempt Supplies Of VAT
Federal Decree-Law no. (8) on VAT defines exempt supplies where no tax is due and as per the provisions of the same law, no input tax may be recovered.
It means that exempt supplies are traded within the UAE without any VAT. Consult with VAT consultants in Dubai to know further about exempt supplies.
- Supply of residential buildings through lease or sale.
- Financial Services.
- Supply of local passenger transport.
- Supply of bare land.
Out-Of-Scope Supplies Of VAT
Out-of-scope are the supplies that are outside of the VAT in the UAE. Unlike the zero-rated, standard-rated, and exempt supplies, you don’t need to declare the supplies out-of-scope in the general VAT returns submitted in each tax period.
Moreover, companies that make only make out of scope supplies don’t need to register for VAT UAE. However, they can carry out a voluntary VAT registration threshold of AED 187,500. Consult with VAT consultants in Dubai to understand more about the out-of-scope supplies of VAT.
Consult With The Best VAT Consultants In Dubai, UAE
It is crucial for companies to properly assess the tax treatment of their supplies for which they can consult with the best VAT consultants such as ebs. ebs is one of the best accounting and bookkeeping services in UAE. We are the leading tax agents in Dubai, approved by the FTA.
ebs likewise offer services, such as accounting and bookkeeping services, VAT services, Auditing, Due Diligence audit services, and many more.
Feel free to contact us with any additional inquiries or requests for accounting services. A free discussion will be given to you by our specialists, who will answer your request immediately.