Every line on a UAE tax invoice carries a VAT treatment, and the treatment decides what tax you charge, what you can reclaim, and how the amount lands on your VAT return. Mix them up and your return is wrong before you start. Here are the five, in plain terms.
1. Standard-rated (5%)
The default for most goods and services. You charge 5% output VAT and the customer pays it. Example: a consultancy invoices AED 20,000 for services and adds AED 1,000 VAT, collecting AED 21,000.
2. Zero-rated (0%)
VAT applies but at 0%. You still report the supply — and crucially, you can still reclaim input VAT on related costs. Common for exports of goods outside the GCC and certain international services.
3. Exempt
No VAT is charged, and you generally cannot reclaim input VAT on related costs. The difference from zero-rated matters: zero-rated preserves your reclaim, exempt does not. Certain financial services and residential property fall here.
4. Reverse charge
The responsibility to account for VAT shifts from supplier to buyer — typical for imported services. You record both the output and input VAT, which usually nets to zero but must still appear on the return.
5. Out of scope
The transaction falls outside UAE VAT entirely and doesn't belong on the VAT return as a taxable supply.
myInvoice.ae's VAT engine applies the right treatment per line, handles inclusive vs exclusive pricing, and rolls everything into a return that reconciles to your actual transactions.