An introduction to setting up VAT in the UAE < Back What happens to existing free zones? Why do we need to reverse charge? Next > Zero Rated, Exempt or Out of Scope? Zero Percent (0%) Tax Rates Don’t make the mistake of assuming that if no tax is applicable then the tax is exempt. There are 3 types of zero-rated taxes; Zero-Rated, Exempt and Out of Scope. They impact how much tax you can recover, so they are particularly important in certain industries. A simple way to look at this is that if all the items you sold were zero-rated (Food) then you would still be able to recover 100% of the VAT on purchases. However, if all the items you sold were Exempt from VAT (Financial Services) then you would not be able to recover any of your VAT! Exempted Supplies (Article 1(27) of the GCC VAT Agreement) There will be guidelines on how to treat items that are exempt but each state is free to set their own rules around what is and what is not exempt from VAT. Examples of likely
Source: United Arab Emirates (UAE) VAT – Zero Rated, Exempt or Out-of-Scope?
