Which goods and services are zero‑rated or exempt?
WHICH GOODS AND SERVICES ARE ZERO-RATED OR EXEMPT?
Which goods and services are zero-rated or exempt from VAT in the UAE? Learn the difference, real examples, and how it affects VAT returns. TAXESMAN explains.
Which Goods and Services Are Zero-Rated or Exempt?
Which goods and services are zero-rated or exempt from VAT in the UAE?
This is one of the most important VAT questions for business owners, especially when pricing services, issuing invoices, or filing VAT returns.
Many businesses in Dubai, Abu Dhabi, Sharjah, and UAE free zones misunderstand the difference between zero-rated and exempt supplies. This confusion can lead to incorrect VAT returns, lost input VAT recovery, or unwanted FTA queries.
In this article, you will clearly learn which goods and services are zero-rated or exempt, the difference between the two, and how this directly impacts your VAT compliance.
If you want clarity instead of guesswork, TAXESMAN is here to help.
What Is the Difference Between Zero-Rated and Exempt Supplies?
Before identifying which goods and services are zero-rated or exempt, it is critical to understand the distinction.
- Zero-rated supplies are taxable at 0% VAT
- Exempt supplies are not subject to VAT at all
Why this difference matters:
- Zero-rated supplies still allow input VAT recovery
- Exempt supplies usually block input VAT recovery
If this already feels confusing, TAXESMAN can review your transactions and explain the correct treatment clearly.
Which Goods and Services Are Zero-Rated in the UAE?
Zero-Rated Supplies Explained Simply
Zero-rated goods and services are taxable, but at a VAT rate of 0%. VAT is charged at zero, yet these transactions must still be reported in the VAT return.
Common zero-rated goods and services in the UAE include:
- Exports of goods and services outside the UAE
- International transportation of passengers and goods
- Certain healthcare services and medical equipment
- Certain educational services
- Investment-grade precious metals
- Newly constructed residential buildings (first supply within the allowed period)
- Crude oil and natural gas
Businesses dealing with zero-rated supplies must still file VAT returns correctly.
If you are unsure whether your supply qualifies as zero-rated, contact TAXESMAN today.
Which Goods and Services Are Exempt From VAT in the UAE?
Exempt Supplies Explained in Plain Language
Exempt supplies are not subject to VAT at all. No VAT is charged, and these transactions are treated differently in VAT returns.
Common exempt goods and services in the UAE include:
- Residential property leasing (non-commercial)
- Bare land
- Local passenger transport
- Certain financial services (margin-based)
- Life insurance
Exempt supplies usually mean you cannot recover input VAT linked to those activities.
If your business has exempt income, TAXESMAN can help you manage partial VAT recovery correctly.
Zero-Rated vs Exempt: Why the Difference Matters for VAT Returns
Many businesses ask which goods and services are zero-rated or exempt, but the real consequences appear during VAT filing.
Why the distinction matters:
• Zero-rated sales are reported as taxable supplies
• Exempt sales reduce your ability to recover input VAT
• Mixing them up can distort your VAT return and cash flow
This is especially common in healthcare, education, real estate, and cross-border services.
Want a clean VAT return with no surprises? TAXESMAN is here to help.
Real Examples: Which Goods and Services Are Zero-Rated or Exempt?
Dubai Example: Exporting Services
A Dubai-based consulting company provides services to a client outside the UAE.
This service may qualify as zero-rated, not exempt, meaning the company can still recover input VAT on its expenses.
Abu Dhabi Example: Residential Property Leasing
A landlord in Abu Dhabi leases residential apartments.
This income is typically VAT-exempt, meaning no VAT is charged, but input VAT on related expenses may not be recoverable.
Sharjah Example: Education Services
An education provider in Sharjah offers qualifying educational services.
These services may be zero-rated, not exempt, depending on the conditions.
Misclassification here is common. TAXESMAN can review your case.
Common Mistakes When Identifying Zero-Rated or Exempt Supplies
Businesses frequently make these errors:
- Treating zero-rated supplies as exempt
- Recovering input VAT on exempt activities
- Failing to report zero-rated supplies in VAT returns
- Assuming all healthcare or education services are automatically exempt
These mistakes increase FTA scrutiny and compliance risk.
If you want to avoid these issues, contact TAXESMAN today.
Conclusion: Which Goods and Services Are Zero-Rated or Exempt?
To recap, which goods and services are zero-rated or exempt in the UAE depends on the nature of the supply, not just the industry.
• Zero-rated supplies are taxable at 0% and allow input VAT recovery
• Exempt supplies are not taxable and usually block input VAT recovery
This distinction directly affects your VAT returns and cash flow.
Don’t take chances with VAT classification. Let TAXESMAN review your activities and handle your VAT compliance the right way.
FAQs: Which Goods and Services Are Zero-Rated or Exempt?
Which goods and services are zero-rated in the UAE?
Exports, international transport, certain healthcare, education, and newly constructed residential properties may be zero-rated.
Which goods and services are exempt from VAT in the UAE?
Residential leasing, bare land, certain financial services, life insurance, and local passenger transport are commonly exempt.
Can I recover VAT on zero-rated supplies?
Yes, input VAT recovery is usually allowed.
Can I recover VAT on exempt supplies?
Generally no, unless special partial recovery rules apply.
Who can help me classify zero-rated and exempt supplies correctly?
TAXESMAN can review your business activities, VAT returns, and FTA compliance.