What are zero-rated supplies in UAE VAT?
Short answer
Zero-rated supplies are taxable supplies charged at 0% VAT: the business charges no VAT to its customer but can still recover the VAT on its own costs. Article 45 of the UAE VAT Law lists them, including exports outside the GCC, international transport of passengers and goods, investment precious metals, the first supply of residential buildings within 3 years of completion, crude oil and natural gas, and specified education and healthcare services. Cabinet decisions list the medicines and medical equipment that are zero-rated.
Zero-rated is not the same as exempt (Article 46): with exempt supplies no VAT is charged either, but the VAT on related costs generally cannot be recovered.
What the law says
Federal Decree-Law No. 8 of 2017 on Value Added Tax and amendments, Article 45
Article 45 - Goods and Services Subject to Zero Rate[^18]
The zero rate shall apply to the following Goods and Services:
- A direct or indirect Export of Goods and Services to outside the Implementing States as specified in the Executive Regulation of this Decree-Law.
- International transport of passengers and Goods which starts or ends in the State or passes through its territory, including Transport-related Services.
- Air passenger transport in the State if it is considered an "international carriage" pursuant to Article 1 of the Warsaw Convention for the Unification of Certain Rules Relating to International Carriage by Air 1929.
- Supply or Import of air, sea and land means of transport for the transportation of passengers and Goods as per the criteria and conditions specified in the Executive Regulation of this Decree-Law.
- Supply of Goods or Services, or Import of Concerned Goods, related to the supply of the means of transport mentioned in Clause 4 of this Article and which are designated for the operation, repair, maintenance or conversion of these means of transport.
- Supply or Import of air or sea rescue and assistance aircrafts or vessels.
- Supply of Goods and Services related to the transport of Goods or passengers aboard air, sea and land means of transport pursuant to the provisions of Clauses 2 and 3 of this Article, designated for consumption on board; or anything consumed by any means of transport, any installations or addition thereto or any other use during transportation.
- The supply or Import of investment precious metals. The Executive Regulation of this Decree-Law shall specify the precious metals and the standards based on which they are classified as being for investment purposes.
- The first supply of residential buildings within 3 years of its completion, either through sale or lease in whole or in part, according to the controls specified in the Executive Regulation of this Decree-Law.
- The first supply of buildings specifically designed to be used by Charities through sale or lease according to the controls specified in the Executive Regulation of this Decree-Law.
- The first supply of buildings converted from non-residential to residential through sale or lease according to the conditions specified in the Executive Regulation of this Decree-Law.
- The supply or Import of crude oil and natural gas.
- The supply of educational Services and related Goods and Services for nurseries, preschool, school education, and higher educational institutions owned or funded by Federal or local Government, as specified in the Executive Regulation of this Decree-Law.
- The supply of preventive and basic healthcare Services and related Goods and Services, and Import of related Concerned Goods according to what is specified in the Executive Regulation of this Decree-Law.
Decisions and FTA guidance on this
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