Essential Items
No General Exemption for Essentials
The UAE does not have a broad zero-rate or exemption for "essential" items. Unlike some jurisdictions that zero-rate basic groceries, the UAE applies 5% VAT to virtually all consumer goods, including:
- Baby food and formula
- Bottled water
- Medicines (unless supplied by qualifying healthcare providers — zero-rated)
- Hygiene products
Zero-Rated Essentials
The following are zero-rated (0%) when supplied by qualifying providers:
- Medicines and medical equipment specified by the Cabinet, supplied to qualifying healthcare providers
- Healthcare services provided by qualifying hospitals, clinics, and medical professionals
- Education services provided by qualifying institutions (including meals provided as part of education)
- Food provided in qualifying educational or healthcare settings
Standard-Rated Consumer Goods
All other consumer goods are standard-rated at 5%:
- Electronics, clothing, furniture
- Personal care items
- Household goods
- Stationery
Price Display
All prices displayed to consumers must be VAT-inclusive. The displayed price should already include the 5% VAT. Failure to display VAT-inclusive prices can result in a AED 2,500 penalty.
Worked Example
A pharmacy sells over-the-counter medicine to a consumer. The medicine is standard-rated at 5% (it is not supplied by a qualifying healthcare provider as part of a healthcare service). However, if the same medicine is supplied by a hospital as part of a treatment, it is zero-rated.