Many countries, when implementing tax legislation, grant preferential treatment to certain goods and services, making them zero-rated or tax-exempt . Governments aim to reduce the tax burden incurred by citizens in the course of conducting their business.
Zero-rated tax can be defined as a tax imposed on goods and services that are zero-rated according to the legal texts contained in tax legislation. The zero rate is imposed on many goods and services, such as exported goods, medical equipment, healthcare-related services, and education services.
Below, we review with you in detail the goods subject to the zero rate under the provisions of Federal Decree-Law No. (8) of 2017 and the recent amendments to the Value Added Tax Law in the UAE contained in Federal Decree-Law No. (18) of 2022.
We distinguish below between goods that are exported directly and goods that are exported indirectly, in both cases outside the applicable countries.
Also browse: The complete guide to registering companies for VAT .
Article Two of Cabinet Resolution (56) of 2017 stipulates the application of the zero rate with regard to the supply of medicines and medical equipment registered with the Ministry of Health and Community Protection or imported with prior permission or approval from it.
It is worth noting that the UAE Cabinet had previously issued Resolution No. (9/12) of 2020, which included applying a zero rate to personal protective equipment used to prevent the COVID-19 virus, provided that the supply and import of such equipment was completed within six months of the date of issuance of the resolution.
The supply and import of investment precious metals for investment purposes is subject to the zero rate. The executive regulations of Federal Decree-Law No. 10 of 2017 regarding value-added tax define the term investment precious metals, indicating that they include gold, platinum, and silver. The following criteria apply to them:
The zero rate applies to cases related to the supply of an aircraft designed or adapted for use in the commercial transport of passengers and goods. However, the zero rate does not apply to aircraft designed for the purpose of recreation, pleasure or sport.
Goods supplied for the repair, operation, maintenance or conversion of such means of transport, with the exception of fuel and oil and gas products, provided that the use of the specified goods is in accordance with the following conditions:
Also browse: Frequently asked questions about VAT .
The zero rate applies to goods provided by the educational institution in accordance with the curriculum recognized by the competent government authority, as well as to reading materials, whether printed or electronic, that are also provided by the educational institution.
Goods provided by the educational institution to non-members, as well as non-educational goods, provided that they are transferred or consumed by students receiving the educational service for educational purposes.
Uniforms or other clothing required by an educational institution for students to wear, whether or not supplied by the educational institution as part of educational services.
Electronic devices related to educational services, as well as food and beverages supplied to the educational institution.
The zero rate applies to buildings occupied by individuals as their primary residence, housing allocated to students or schoolchildren, housing allocated to the armed forces and security forces, and nursing homes.
The residential building does not include buildings that are used as a hotel, hospital, or the like.
This applies to the first supply of any building or part thereof that has been converted into a residential building, provided that the supply has been completed within three years from the date of completion of the conversion, and that the building or any part thereof has not been used as a residential building during the five years prior to the commencement of the conversion work.
This applies to the first sale or lease of a building or part thereof, provided that it is designed to be used by a charitable organization whose activity is charitable only.
Farhat & Partners, our consultants specialize in all matters related to value-added tax and the new amendments to the law.
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