Under the UAE VAT laws there are two types of supplies: Taxable supplies and Exempted supplies.
Taxable supplies have the following VAT rates:
1. Standard rate – 5% (for eg. Retail purchases, Hotel and restaurant, Commercial property sale or lease, Vehicle sale or lease)
2. Zero rates – 0% (for eg. Exports, Healthcare, Education, International transport, First sale of residential property)
Apart from the above, in the event a business imports goods or services used for the purpose of its business, it should account for VAT under Reverse charge mechanism at standard rate considering the purchases were made within UAE.
Exempted supplies are supplies which are unaffected by the VAT. No VAT is charged on such supplies. For eg. Local transport, Sale of bare land, Residential property lease, Second and subsequent sale of residential property, certain financial services.
For more information on UAE VAT, visit UAE VAT Advisory page.