Local News

Federal Tax Authority Announces Supplies Subject To VAT, Identifies Exempt Supplies
(5 December 2017)

The Federal Tax Authority (FTA) has announced the supplies that will be subject to Value Added Tax (VAT) as of January 1, 2018, revealing selected sectors that will be assigned zero-rated tax, such as education, healthcare, oil and gas, transportation and real estate.

Selected supplies in sectors such as transportation, real estate, financial services will be completely exempt from VAT, whereas certain government activities will be outside the scope of the tax system (and, therefore, not subject to tax). These include activities that are solely carried out by the government with no competition with the private sector, activities carried out by non-profit organisations.

The UAE Cabinet is expected to issue a Decision to identify the government bodies and non-profit organisations that are not subject to VAT.

The below table outlines all supplies that will be subject to the 5% Value Added Tax, as well as zero-rated supplies and exempt supplies:

VAT Treatment on Selected Industries

Education

VAT rate

Private and public school education (excluding higher education) and related goods and services provided by education institution

0%

Higher education provided by institution owned by government or 50% funded by government, and related goods and services

0%

Education provided by private higher educational institutions, and related goods and services

5%

Nursery education and pre-school education

0%

School uniforms

5%

Stationery

5%

Electronic equipment (tablets, laptops, etc.)

5%

Renting of school grounds for events

5%

After school activities for extra fee

5%

After school activities supplied by teachers and not for extra charge

0%

School trips where purpose is educational and within curriculum

0%

School trips for recreation or not within curriculum

5%

Healthcare

VAT rate

Preventive healthcare services including vaccinations

0%

Healthcare services aimed at treatment of humans including medical services and dental services

0%

Other healthcare services that are not for treatment and are not preventive (e.g. elective, cosmetic, etc)

5%

Medicines and medical equipment as listed in Cabinet Decision

0%

Medicines and medical equipment not listed in Cabinet Decision

5%

Other medical supplies

5%

Oil and Gas

VAT rate

Crude oil and natural gas

0%

Other oil and gas products including petrol at the pump

5%

Transportation

VAT rate

Domestic passenger transportation (including flights within UAE)

Exempt

International transportation of passengers and goods (including intra-GCC)

0%

Supply of a means of transport (air, sea and land) for the commercial transportation of goods and passengers (over 10 people)

0%

Supply of goods and services relating to these means of transport and to the transportation of goods and passengers

0%

Real estate

VAT rate

Sale and rent of commercial buildings (not residential buildings)

5%

First sale/rent of residential building after completion of construction or conversion

0%

First sale of charitable building

0%

Sale/rent of residential buildings subsequent to first supply

Exempt

Hotels, motels and serviced accommodation

5%

Bare land

Exempt

Land (not bare land)

5%

UAE citizen building own home

5% (recoverable)

Financial services

VAT rate

Margin based products (products not having an explicit fee, commission, rebate, discount or similar)

Exempt

Products with an explicit fee, commission, rebate, discount or similar

5%

Interest on forms of lending (including loans, credit cards, finance leasing)

Exempt

Issue, allotment or transfer of an equity or debt security

Exempt

 Investment gold, silver and platinum, jewellery

VAT rate

≥99% pure and tradable in global markets

0%

<99% pure

5%

Jewellery

5%

 Insurance and Reinsurance

VAT rate

Insurance and reinsurance (including health, motor, property, etc)

5%

Life insurance and life reinsurance

Exempt

Food & Beverages

VAT rate

Food and beverages

5%

Telecommunications and electronic services

VAT rate

Wired and wireless telecommunications and electronic services

5%

Government activities

VAT rate

Sovereign activities which are not in competition with the private sector undertaken by designated government bodies

Considered outside VAT system

Activities that are not sovereign or are in competition with the private sector

VAT rate dependent on good/service ignoring provider

Not for Profit Organizations

VAT rate

Activities of foreign governments, international organisations, diplomatic bodies and missions acting as such (if not in business in the UAE)

Considered outside VAT system

Charitable activities undertaken by societies and associations of public welfare which are listed by Cabinet Decision

Considered outside VAT system

Activities of other not for profit organizations (not listed in Cabinet Decision) which are not business activities

Considered outside VAT system

Business activities undertaken by the above organizations

VAT rate dependent on good/service ignoring provider

Free zones

VAT rate

Supplies of goods between businesses in designated zones

Considered outside VAT system

Supplies of services between businesses in designated zones

VAT rate dependent on service ignoring location

Supplies of goods and services in non-designated zones

 

VAT rate dependent on good/service ignoring location

Supplies of goods and services from mainland to designated zones or designated zones to mainland

VAT rate dependent on good/service ignoring location

 

Other

VAT rate

Export of goods and services to outside the GCC implementing states

0%

Activities undertaken by employees in the course of their employment, including salaries

Considered outside VAT system

Supplies between members of a single tax group

Considered outside VAT system

Any supplies of services or goods not mentioned above (includes any items sold in the UAE or service provided)

5%

Second hand goods (e.g. used cars sold by retailers), antiques and collectors’ items

5% of the profit margin




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