The regulations define exempt supplies as supplies of goods and services on which VAT in UAE is not chargeable but also non-recoverable.
Exempt supplies are the following:
- Financials Services
- Residential Building
- Bare Land
- Local Transport services.
Where a person makes both taxable supplies and exempt supplies. He is partially exempt and may or may not be able to recover all his input VAT in UAE.
All input tax directly attributable to taxable supplies can be reclaimed but none of the input tax directly attributable to exempt supplies can be claimed.
Financial Services in UAE
The Financial Services defined above are exempt from VAT in UAE.
when they are not conducted in return for a specific fee, commission, discount, rebate, or similar.
In practice, they will be exempt from UAE VAT when interest is charged.
as will financial services remunerated via a margin or spread, but with no explicit fee charged. But in cases where they are conducted for a fee or commission etc, the supply will be subject to UAE VAT.
Residential Building in UAE
The sale or lease of the residential building is exempt from UAE VAT in Art. 43 of the regulations as per the dispositions of Art 46(2) of the UAE VAT LAW. A residential building is a building designed for human occupation to be used as a primary residence, such as a house, flat, apartment, student accommodation and accommodation of the armed forces or labour accommodation.
Bare Land in UAE
The supply of bare land is exempt on the condition that no (partially completed) buildings or civil engineering works are being carried out on the land.
Local Transport in UAE
The supply of local passenger transport services is exempt when the service takes place within the UAE.
Review the Title 7 of the regulations.
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