Food and Beverages VAT Treatment
General Rule: Standard-Rated at 5%
Most food and beverages sold in the UAE are standard-rated at 5%. This includes:
- Fresh and frozen food items
- Packaged and processed foods
- Beverages (water, soft drinks, juices)
- Meat, poultry, fish, dairy, fruits, vegetables
- Bakery items and confectionery
Restaurant and Catering
- Restaurant meals: Standard-rated at 5%.
- Catering services: Standard-rated at 5%.
- Takeaway and delivery food: Standard-rated at 5%.
- The restaurant charges 5% VAT on the total bill (food + service charge).
What is NOT Standard-Rated?
Certain items are treated differently:
- Bottled water: Standard-rated at 5%.
- Alcoholic beverages: Standard-rated at 5% (in licensed establishments).
- Baby food and formula: Standard-rated at 5%.
- Food supplied by qualifying educational institutions: Zero-rated (as part of education).
- Food supplied by qualifying healthcare institutions: Zero-rated (as part of healthcare).
No Special Zero-Rating for Food
Unlike some countries (e.g., UK, Ireland) that zero-rate basic food items, the UAE applies 5% VAT to virtually all food and beverages. There is no general zero-rate for groceries or essential food items.
Supermarkets and Grocery Stores
Supermarkets and grocery stores must:
- Charge 5% VAT on all food and beverage items.
- Issue tax invoices or simplified tax invoices for B2C sales.
- Recover input tax on purchases (stock, equipment, utilities).
Worked Example
A customer buys AED 200 worth of groceries (bread, milk, fruit, meat) from a supermarket. The supermarket charges 5% VAT = AED 10. The total bill is AED 210. The supermarket recovers input tax on its stock purchases (e.g., AED 150 from suppliers + AED 7.50 input tax).