The difference between zero-rated and Exempt VAT in the UAE is crucial for businesses to grasp. Value-added tax (VAT) can be categorised into zero rated and Exempt in the UAE. Zero-rated VAT applies to certain goods and services that are taxed at a rate of 0%. While these supplies are technically taxable, the VAT charged is zero. Businesses that provide zero-rated supplies can reclaim the input tax they’ve paid on their expenses, benefiting their cash flow. Common examples of zero-rated supplies include exports and international transport services.

On the other hand, exempt VAT is related to specific goods and services completely free from VAT. Businesses dealing in exempt supplies cannot recover the VAT incurred on their purchases, leading to higher operational costs. This category typically includes certain financial services and residential property rentals.

Understanding the difference between zero-rated and exempt VAT in the UAE is vital for businesses to ensure compliance and effectively manage their tax strategies. In this blog, we will guide you through the differences between zero rates VAT and exempt VAT in the UAE.