Definition

An Exempt Supply in the UAE is a supply of goods or services that is not subject to VAT, and the supplier cannot recover input VAT on related purchases or expenses.

Key points

• Common exempt supplies: residential property rent, certain financial services, and local passenger transport.
• No VAT is charged on the sale.
• Input VAT on costs linked to exempt supplies is non-recoverable.
• Businesses making exempt supplies may still need to register if they cross the threshold with other taxable activities.

Practical example

A landlord renting out a residential apartment for AED 60,000 per year does not charge VAT, and cannot claim back input VAT on related maintenance costs.

Why it matters

Understanding exempt supplies helps businesses correctly apply VAT, avoid errors in invoicing, and manage input VAT claims.