VAT in the UAE: What Products and Services Are Exempt

All you need to know about what products and services have VAT applied in the UAE

Posted on

14 January 2018

| Last updated on 13 November 2018

by Rebecca Roberts

VAT in the UAE: What Products and Services Are Exempt

While the introduction of a 5% VAT standard rate in the UAE has been a bitter pill to swallow for many expats living here, there is a silver lining – as not all products and services incur VAT charges.

Of course, it’s understandable that many expats are concerned about the increase in cost of living in Dubai and the UAE – but depending on your lifestyle and spending behaviour, the introduction of VAT shouldn’t leave a huge gap in your wallet.

It’s important to fully understand that there is three categories of VAT that has been implemented in the UAE:

1. VAT tax exempt
2. VAT tax at 5%
3. VAT tax at 0%

To help you fully understand what is taxed by VAT and what is exempt from VAT in the UAE, here’s a full guide to the services and products affected.

Services and products exempt from VAT tax in the UAE

Air travel: domestic passenger transportation, including flights within the UAE, are exempt from VAT
Residential buildings: the sale or rental of residential buildings subsequent to first supply
Bare land: the buying/selling of bare land is exempt
Interest on loans: any interest on forms of lending, like loans, credit cards and finance leasing are exempt
Equity/debt: the issuance, allotment or transfer of an equity or debt security is exempt
Life insurance: and life re-insurance are exempt

Services and products taxed with 5% VAT in the UAE

Food: this includes your weekly food shop, restaurants, cafes, lounges and bars
Water bills: your water provider, like DEWA, will charge an additional 5% to your monthly bills for their services
Electricity bills: as above, your electricity provider will charge an additional 5% to your monthly bills for services
Jewellery and watches: gold silver and platinum that is less than 99% pure, for example like jewellery, incurs the standard 5% VAT rate – however, gold bullions for investment does not
Cars and car rentals: that’s right, your monthly car payment will have an additional 5% added
Electronics and smartphones: TVs, PCs, PlayStations, Xbox, iPhones, Samsungs… You name it
Entertainment: like the cinema! Or event and concert tickets, and bowling etc.
Commercial rents: so if you are a business owner, the rental for your commercial space and offices are subject to 5% VAT
Tenancy contracts: if you pay an estate agent’s fee, that will have 5% VAT included, as well as Ejari for example
Plastic surgery: elective cosmetic procedures and treatments for aesthetic purposes are subject to 5% VAT
Hotels and serviced apartments: want a staycation? You’ll pay the 5% VAT for them now
Petrol: oil and gas products, included petrol at the pump will incur a 5% additional charge for VAT
Higher education: education provided by private higher educational institutes, and related goods and services will have an added 5% VAT charge
Private and public school uniforms: school shopping just got that little bit more expensive for parents…
Private school books and stationary: order books from private schools will now be subject to 5% VAT
After school activities: for activities that incur an extra fee from parents, these are subject to 5% VAT
School trips: any trips that are for recreational purposes or not within the school’s curriculum are subject to 5% VAT

Services and products subject to 0% VAT tax in UAE

Private and public school education: this excludes higher education, and includes related goods and services provided by the education institution
Higher education: only in circumstances where the institution is owned by the government, or is 50% funded by the government, and all related goods and services
Early education: nursery education and pre-school education has 0% VAT applied
After school activities: activities that are supplied by teachers, and not for an extra charge to parents have 0% VAT applied
School trips: school trips where the purpose of the excursion is educational, and within the school’s curriculum have 0% VAT applied
Medical fees: preventative healthcare services, including vaccinations have 0% VAT applied – as well as human medical services and dental services
Crude oil and natural gas: have 0% VAT applied
Air travel: international transportation of passengers and goods, including intra-GCC, have 0% applied
Transport: supply of a means of transport (air, land and sea) for the commercial transportation of goods and passengers (over 10 people)
Transport goods and services: the supply of goods and services relating to these means of transport and to the transportation of goods and passengers
Residential properties: the first sale or rental of a residential building after completion of construction or conversion
Charitable building: the first sale of a charitable building is subject to 0% VAT
Gold, silver and platinum: if it’s more than 99% pure and tradable in global markets as an investment, it has 0% VAT applied
Exports: exports of goods and services to outside the GCC implementing states is 0% VAT