The Regulations of the UAE make provisions for two types of taxable Supplies in
accordance with the Agreement as follows:
- Taxable supplies are subject to the 5% rate of VAT, called standard-rated supplies.
- Taxable supplies are subject to the 0% rate of VAT, called zero-rated supplies.
A trader making taxable supplies will be permitted or required to register,
depending on his turnover.
Whilst there is a definition of taxable supplies in the VAT Law and Regulations, the
legislation does not provide a list of standard-rated taxable supplies. Supplies are
standard-rated by default: if they are not covered by the provisions relating to
zero-rated or exempt supplies then they will be standard-rated.
Examples of standard-rated supplies include:
- food
- clothing
- machinery
- hotel accommodation
- postal services including postage stamps issued by the Emirates Post Group
- consultancy services offered by independent directors
- most insurance and related services.
The zero-rate means that VAT is charged, but at 0%. Arts. 30-41 of the Regulations
sets out the conditions for zero-rating and the supplies that are zero-rated.
Examples of zero-rated supplies include:
- exports of goods from the UAE
- services provided to non-GCC residents
- international transport of goods and people and insurance relating to this,
except for travel insurance
- precious metals
- the first supply of residential buildings
- healthcare
- many education services
Under Art. 45 of the VAT Law, zero-rating is also the default position for supplies of
crude oil and natural gas. Note however that refined oil is standard-rated, not zero-rated. (Art. 45(12) of the VAT Law).
Insurance
THE AUTHORITY has issued a VAT Guide on “Insurance” (VATGIN1). The general
principle applicable is that all insurance and related services are subject to VAT at
the standard rate. There are limited exceptions to this general principle which are
set out in the VAT Guide.
Note that within these exceptions, while life insurance and reinsurance are exempt
(Art. 42(3)(c) of the Regulations), insurance (not travel insurance) relating to
The international transport of goods and people is zero-rated (Art. 33(2) (c) of the
Regulations). This is further explained in the Guide, with the two categories defined
as follows:
A life insurance contract is defined as a contract lawfully entered into to the
The extent that it places a sum or sums at risk upon the contingency of the termination
or continuance of human life, marriage, and similar relationships permitted under
applicable law, or the birth of a child. (Art. 42(1)(c) of the Regulations).
Insurance relating to the international transportation of passengers or goods is a
contract of insurance which is provided in connection with the international
transportation of goods or passengers, including a transfer which begins or ends in
the UAE or which passes through the UAE.
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