VAT Categories

By kloudboy | August 12 , 2017 | 01

Under the UAE tax laws, VAT-applicable goods and services will be divided into three categories.

VAT at zero rate: Under this zero per cent VAT is charged, VAT credit available. Sales will still need to be recorded in companies’ VAT returns, as with other categories

VAT at standard rate: Under this 5 per cent VAT is charged. Most goods and services will likely fall in this category, including electronics, cars, dining out and entertainment. The 5 per cent VAT rate will be passed on to consumers, with VAT credit available for companies.

VAT exempt category: In this, VAT on inputs is not passed on to consumers, thus no VAT credit is available. Corporates will not be able to recover or reclaim the 5 per cent VAT incurred on exempt items or services. Thus, exempt inputs have the potential to erode business profit margins.