Quick Answer
UAE VAT law exempts four categories of supply from VAT altogether: margin-based financial services, local passenger transport, bare land, and the resale or lease of residential property after its first supply. Cabinet Decision No. 100 of 2024, effective 15 November 2024, folded the transfer and exchange of virtual assets, including cryptocurrencies, into the financial services exemption, applied retrospectively to 1 January 2018. Exempt supplies carry no input VAT recovery and do not count toward the AED 375,000 mandatory or AED 187,500 voluntary registration thresholds, so getting the classification right changes both your VAT bill and your registration position.
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The Four Categories of VAT-Exempt Supply
Federal Decree-Law No. 8 of 2017 and its Executive Regulation (Cabinet Decision No. 52 of 2017, as amended) set out a short, fixed list of exempt supplies. Unlike zero-rated supplies, which are taxed at 0% and still allow input VAT recovery, an exempt supply is entirely outside the VAT system: no output tax is charged, and input tax on related costs generally cannot be reclaimed.
| Category | What is exempt | Key limit or exception |
|---|---|---|
| Financial services | Margin-based income such as interest on loans and deposits, dealing in shares or bonds, and qualifying life insurance | Services charged as an explicit fee, commission, or discount stay taxable at 5% |
| Local passenger transport | Qualifying road, marine, and rail transport of passengers within the UAE, including buses, taxis, and metro | Chartered or tourism-oriented transport does not qualify |
| Bare land | Land with no buildings, utilities, or civil works | Once infrastructure or site preparation begins, the supply becomes taxable |
| Residential real estate (subsequent supply) | Resale or lease of residential property after its first supply | The first supply within three years of completion is zero-rated, not exempt, and remains input-VAT recoverable |
Everything outside this list, including commercial property, most retail goods, and standard professional services, is taxable at 5% unless a specific zero-rating provision applies. For a full comparison of how exempt and zero-rated supplies are worked out side by side, see our breakdown of zero-rated versus exempted VAT supplies.
Why the Exempt-Versus-Zero-Rated Line Changes Your Numbers
The distinction is not academic. Consider a developer that completes a residential building and sells the first unit within two years for AED 2,000,000. That sale is zero-rated: the developer charges 0% VAT to the buyer but can still recover the input VAT it paid on construction, typically around AED 100,000 at 5% on qualifying costs. Three years later, the same unit resells for AED 2,200,000. That second sale is exempt: no VAT is charged, and the seller cannot recover input VAT on costs like agency fees or refurbishment tied to that sale.
Registration is affected the same way. A local taxi operator earning AED 250,000 a year from passenger fares (exempt) and AED 150,000 from vehicle-branding advertising (taxable) only counts the AED 150,000 taxable revenue toward the registration thresholds. Since that falls below the AED 187,500 voluntary threshold, the operator has no registration obligation at all, though it may still register voluntarily if it wants to recover input tax on the taxable side of the business. Businesses unsure how exempt revenue affects their registration position should get this checked before, not after, the FTA raises the question; our VAT registration services team reviews exactly this kind of mixed-supply position.
The 2024 Amendments That Reshaped the Exemption List
Cabinet Decision No. 100 of 2024 amended the VAT Executive Regulation with effect from 15 November 2024, and several changes directly touch the exemption rules:
- Virtual assets and cryptocurrencies: the transfer of ownership and the exchange of virtual assets, including cryptocurrencies, is now exempt as a financial service, applied retrospectively from 1 January 2018. Managing and safeguarding virtual assets on a margin basis is also exempt, but income from cryptocurrency mining is not treated as an exempt financial service and generally remains taxable.
- Investment fund management: the exemption for fund management services was narrowed to services provided by an entity licensed in the UAE to manage the fund, covering fund operation, investment management, and performance-related services for the fund’s benefit.
- Government real estate transactions: the transfer of ownership or usage rights over government-owned real estate and infrastructure between government bodies, for government projects, is now treated as outside the scope of VAT rather than as a taxable supply between related parties.
If your business classified crypto transactions, fund management fees, or government-linked property transfers under the pre-November 2024 rules, that position is worth revisiting, particularly given the retrospective start date on virtual assets. For the wider set of changes Cabinet Decision No. 100 of 2024 made outside the exemption rules, including zero-rating and input tax recovery adjustments, see our summary of the recent UAE VAT amendments.
Frequently Asked Questions
Is a VAT exemption the same as zero-rating?
No. Zero-rated supplies are taxed at 0% and still allow input VAT recovery. Exempt supplies are outside the VAT system entirely, with no output tax charged and generally no input VAT recovery on related costs.
Do exempt supplies count toward the AED 375,000 registration threshold?
No. Only taxable supplies, including zero-rated ones, count toward the AED 375,000 mandatory and AED 187,500 voluntary VAT registration thresholds. Purely exempt revenue is excluded from that calculation.
Can a business recover input VAT on costs used to make exempt supplies?
Generally no. A business making both taxable and exempt supplies must apportion input VAT between the two under the partial exemption rules, recovering only the portion attributable to taxable supplies.
Are cryptocurrency transactions VAT-exempt in the UAE?
Yes, since Cabinet Decision No. 100 of 2024. The transfer and exchange of virtual assets is exempt, applied retrospectively from 1 January 2018. Fee-based crypto services and mining income are treated differently and generally remain taxable.
Is renting out a residential apartment VAT-exempt?
The first supply of a new residential unit within three years of completion is zero-rated. Every supply after that, including standard residential leases, is exempt.
Does selling bare land attract VAT?
No, provided the land is genuinely undeveloped, with no buildings, utilities, or site works. Once any development begins, the land is treated as a different, taxable category of supply.
Tax Consultant Dubai
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How Tax Consultant Dubai Can Help
Getting exempt, zero-rated, and taxable supplies classified correctly affects your registration status, your input VAT recovery, and your FTA filing position, often all at once. Our VAT consultancy services team reviews your supply mix against the current exemption rules and flags any exposure before it becomes a penalty.
Contact Tax Consultant Dubai today to have your VAT exemption and registration position reviewed.
