With the implementation of the Value Added Tax, or what is commonly known as the VAT in the UAE in 2018, an additional tax of 5% is levied on good, products and services. However, the UAE boasts of one of the lowest VAT rates globally. Companies and businesses can often be thrown off-guard because the intricacies and the seeming notoriety surrounding the VAT may come across as intimidating, especially if you don’t understand them. Here are a few facts to keep in mind when you want to gauge the influence of the VAT on exports made from the UAE.
Zero-rated services
In the UAE, some services and goods do not come under the ambit of the VAT, meaning that they are exempted from the tax. These are essentially categorised as zero-rated products, goods and services, details of which are listed in the GCC-wide agreement. The law in the UAE states explicitly that the “Export of goods and services outside the GCC and international transportation are zero-rated. They must be reported in tax returns, but no VAT will apply.” Thus, when you export an item that is zero-rated, it must still be recorded.
Services and goods that are zero-rated
The services and goods that are exempted from the VAT include certain types of precious metals, certain health care services, and associated goods, some educational services and associated goods, rescue aircraft or vessels, and international transport of goods and passengers, among others.
Goods and services that are exempted
In addition to goods that are zero-rated, there are also some items that are classified as exempt. This essentially means that they are not levied with the VAT. Some of these items include life insurance, renewal of life insurance, bare land, local passenger transport, residential buildings except the ones that are already zero-rated and certain financial services, among others.
Understanding the VAT and its significance
Understanding the VAT is essential especially for those who are in the export domain. When you ship an item overseas you do not want to run into bureaucratic trouble just because you failed to follow a few VAT-related procedures. It can also help your business since the government in the UAE has clearly specified the scenarios where you could be penalised. These include not submitting tax returns, not registering with the tax authorities, lapses in recording tax information and trying to shrug off tax by providing false information, among others,