Value Added Tax (VAT) is a consumption tax levied on goods and services at each stage of the supply chain. It was introduced in the United Arab Emirates (UAE) on January 1, 2018, as part of the GCC (Gulf Cooperation Council) countries’ agreement to diversify their revenue sources. The standard VAT rate in the UAE is currently set at 5%.
One important concept to understand when it comes to VAT in the UAE is exemptions. VAT exemption UAE refers to goods and services not subject to VAT. This is different from zero-rated supplies in UAE, which are still taxable at 0% but are considered outside the scope of VAT. Understanding the difference between exempt supplies in UAE and zero-rated supplies in UAE is crucial for both businesses and consumers in the UAE.
If your business activity falls under the UAE VAT exemption list, the exemption applies automatically. You don’t need to register or apply for anything specific.