Wednesday 06, December 2017 by Jessica Combes

FTA announces supplies subject to VAT and identifies exempt supplies


The Federal Tax Authority (FTA) has announced the supplies that will be subject to Value Added Tax (VAT) as of 1 January 1 2018, revealing selected sectors that will be assigned zero-rated tax, such as education, healthcare, oil and gas, transportation and real estate.

Selected supplies in sectors such as transportation, real estate, financial services will be completely exempt from VAT, whereas certain government activities will be outside the scope of the tax system (and, therefore, not subject to tax). These include activities that are solely carried out by the government with no competition with the private sector, activities carried out by non-profit organisations.

The UAE Cabinet is expected to issue a Decision to identify the government bodies and non-profit organisations that are not subject to VAT.

The below table outlines all supplies that will be subject to the five per cent Value Added Tax, as well as zero-rated supplies and exempt supplies:


  • Private and public school education (excluding higher education) and related goods and services provided by education institution (zero per cent)
  • Higher education provided by institution owned by government or fivezero per cent funded by government, and related goods and services (zero per cent)
  • Education provided by private higher educational institutions, and related goods and services (five per cent)
  • Nursery education and pre-school education (zero per cent)
  • School uniforms (five per cent)
  • Stationery (five per cent)
  • Electronic equipment (tablets, laptops, etc.) (five per cent)
  • Renting of school grounds for events (five per cent)
  • After school activities for extra fee (five per cent)
  • After school activities supplied by teachers and not for extra charge (zero per cent)
  • School trips where purpose is educational and within curriculum (zero per cent)
  • School trips for recreation or not within curriculum (five per cent)


  • Preventive healthcare services including vaccinations (zero per cent)
  • Healthcare services aimed at treatment of humans including medical services and dental services (zero per cent)
  • Other healthcare services that are not for treatment and are not preventive (e.g. elective, cosmetic, etc)(five per cent)
  • Medicines and medical equipment as listed in Cabinet Decision (zero per cent)
  • Medicines and medical equipment not listed in Cabinet Decision (five per cent)
  • Other medical supplies  (five per cent)

Oil and gas:

  • Crude oil and natural gas (zero per cent)
  • Other oil and gas products including petrol at the pump (five per cent)


  • Domestic passenger transportation (including flights within UAE) (Exempt)
  • International transportation of passengers and goods (including intra-GCC) (zero per cent)
  • Supply of a means of transport (air, sea and land) for the commercial transportation of goods and passengers (over 1zero people) (zero per cent)
  • Supply of goods and services relating to these means of transport and to the transportation of goods and passengers (zero per cent)

Real estate:

  • Sale and rent of commercial buildings (not residential buildings) (five per cent)
  • First sale/rent of residential building after completion of construction or conversion (zero per cent)
  • First sale of charitable building (zero per cent)
  • Sale/rent of residential buildings subsequent to first supply (Exempt)
  • Hotels, motels and serviced accommodation (five per cent)
  • Bare land (Exempt)
  • Land (not bare land) (five per cent)
  • UAE citizen building own home (five per cent) (recoverable)

Financial services:

  • Margin based products (products not having an explicit fee, commission, rebate, discount or similar) (Exempt)
  • Products with an explicit fee, commission, rebate, discount or similar (five per cent)
  • Interest on forms of lending (including loans, credit cards, finance leasing) (Exempt)
  • Issue, allotment or transfer of an equity or debt security (Exempt)

Investment gold, silver and platinum, jewellery: 

  • ≥99 per cent pure and tradable in global markets (zero per cent)
  • <99 per cent pure (five per cent)
  • Jewellery (five per cent) 

Insurance and Reinsurance

  • Insurance and reinsurance (including health, motor, property, etc) (five per cent)
  • Life insurance and life reinsurance (Exempt)

Food and beverages:

  • Food and beverages (five per cent)

Telecommunications and electronic services:

  • Wired and wireless telecommunications and electronic services (five per cent)

Government activities

  • Sovereign activities which are not in competition with the private sector undertaken by designated government bodies (Considered outside VAT system)
  • Activities that are not sovereign or are in competition with the private sector (VAT rate dependent on good/service ignoring provider)

Not for Profit organisations

  • Activities of foreign governments, international organisations, diplomatic bodies and missions acting as such (if not in business in the UAE) (Considered outside VAT system)
  • Charitable activities undertaken by societies and associations of public welfare which are listed by Cabinet Decision (Considered outside VAT system)
  • Activities of other not for profit organisations (not listed in Cabinet Decision) which are not business activities (Considered outside VAT system)
  • Business activities undertaken by the above organisations (VAT rate dependent on good/service ignoring provider)

Free zones:

  • Supplies of goods between businesses in designated zones (Considered outside VAT system)
  • Supplies of services between businesses in designated zones (VAT rate dependent on service ignoring location)
  • Supplies of goods and services in non-designated zones (VAT rate dependent on good/service ignoring location)


  • Export of goods and services to outside the GCC implementing states (zero per cent)
  • Activities undertaken by employees in the course of their employment, including salaries (Considered outside VAT system)
  • Supplies between members of a single tax group (Considered outside VAT system)
  • Any supplies of services or goods not mentioned above (includes any items sold in the UAE or service provided) (five per cent)
  • Second hand goods (e.g. used cars sold by retailers), antiques and collectors’ items (five per cent of the profit margin)








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