The UAE is going to implement 5% VAT from 1st January 2018. VAT is a type of general consumption tax that is collected incrementally, based on the value added, at each stage of production or sales. It is a kind of consumer tax where the end users will be paying the desired rate of VAT. VAT is also known as goods and services tax (GST) in some parts of the world.
There are two types of Supplies in the UAE VAT, such as:
Exempted Supplies and Taxable Supplies.
Taxable Supplies has been further classified to zero rated and standard/full rated.
UAE VAT is classified as below:
Exempt Supplies are those kinds of supplies which are unaffected by VAT implementation in the UAE. Tax amount is not charged on such supplies. Hence, the input tax in the exempt supply cannot be deducted.
Following are the common Exempt Supplies under the UAE VAT