VAT in the UAE: What Products and Services Are Exempt |

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

For the full list and for more information, you can also visit the Federal Tax Authority website, here.