UAE Tax VAT Zero rate, exemption and special schemes: practice questions with answers

Question 1

Which of these supplies, each made by a registrant in October 2026, is exempt from VAT as a supply of bare land?

1. A Sale of a plot with no buildings or civil engineering works on it
2. B Sale of a plot on which the concrete frame of a warehouse has been half built
3. C Sale of a plot laid out and surfaced as a finished commercial car park
4. D Sale of a completed retail unit together with the land beneath it

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Answer: A. Under Article 46 of the VAT Law, the supply of bare land is exempt. The Executive Regulation defines bare land as land that is not covered, wholly or partly, by any completed or partially completed buildings or civil engineering works.

Only the empty plot qualifies. The half-built warehouse, the finished car park and the retail unit with its land are supplies of commercial real estate, standard-rated at 5%.

Question 2

Qirsh Digital Assets LLC, a registrant, converted one virtual asset into another for a business customer in March 2022, earning a spread with no separate fee, and treated the supply as standard-rated at the time. How is the transfer and conversion of virtual assets treated under the Executive Regulation as amended by Cabinet Decision No. 100 of 2024?

1. A Exempt only from 15 November 2024, so the March 2022 conversion stays standard-rated
2. B Exempt, with effect from 1 January 2018, so the March 2022 conversion is also exempt
3. C Zero-rated from 1 January 2018, so input tax on related costs remains recoverable
4. D Standard-rated, because virtual-asset services are not financial services

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Answer: B. Cabinet Decision No. 100 of 2024 amended the Executive Regulation (Article 42, financial services) to make the transfer of ownership and conversion of virtual assets exempt. Although most of the Decision took effect on 15 November 2024, this change applies retrospectively from 1 January 2018.

Qirsh's March 2022 conversion therefore falls within the exemption. As an exempt supply it carries no output tax, and input tax attributable to it is not recoverable.

Question 3

Bustan Properties LLC, a registrant, owns a building completed in 2015 and makes these supplies in 2026. Which of them is exempt?

1. A A lease of the ground floor to a clinic for use as medical consulting rooms
2. B A lease of 40 basement parking spaces to the owner of a neighbouring office tower
3. C A two-year lease of an apartment to a company that houses its manager there as his home
4. D A lease of rooftop space to a telecoms operator for its antenna equipment

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Answer: C. Under Article 46 of the VAT Law, supplies of residential buildings by sale or lease are exempt, other than the zero-rated first supply within three years of completion (Article 45). The building was completed in 2015, so these leases are not first supplies.

Residential status depends on the property being used as a place of residence, not on who the tenant is, so a lease to a company that houses an employee in the apartment is still exempt. The clinic, parking and rooftop leases are commercial supplies, standard-rated at 5%.

Question 4

Ruwad Real Estate LLC, a registrant, sells a building that was completed in 2018 and has been leased out since then. The building has shops on the ground floor and apartments above. The agreed price is AED 12,000,000 excluding any VAT, of which 30% is attributable to the shops on a fair and reasonable basis. What VAT must Ruwad charge on the sale?

1. A AED 171,428.57
2. B AED 180,000
3. C AED 420,000
4. D AED 600,000

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Answer: B. A mixed-use building is split between its parts on a fair and reasonable basis.

- Shops (commercial): standard-rated.
- Apartments: the building was completed in 2018 and has already been supplied by lease, so this sale is not a first supply; it is exempt under Article 46 of the VAT Law.

VAT = 5% x (30% x 12,000,000) = 5% x 3,600,000 = AED 180,000.

Question 5

Asfar Industrial LLC, a registrant, sells a completed warehouse together with the land it stands on for a total price of AED 8,610,000, inclusive of VAT. The contract states that AED 3,150,000 of the VAT-inclusive price relates to the land. What output tax must Asfar account for?

1. A AED 0
2. B AED 260,000
3. C AED 410,000
4. D AED 430,500

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Answer: C. Article 46 of the VAT Law exempts only residential buildings and bare land. Land covered by a completed building is not bare land, so the land and the warehouse together form a standard-rated supply of commercial real estate.

The price includes VAT, so:
Output tax = 8,610,000 x 5/105 = AED 410,000 (the VAT-exclusive price is AED 8,200,000).

Question 6

Sayyara Pre-Owned LLC, a registrant that has notified the FTA that it uses the profit margin scheme, bought a used car from a private individual for AED 38,000 and sold it to a customer for AED 50,600, a price that includes any VAT due. What VAT must Sayyara account for on the sale?

1. A AED 600
2. B AED 630
3. C AED 2,409.52
4. D AED 2,530

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Answer: A. Under Article 43 of the VAT Law and the Executive Regulation (Article 29), a registrant selling eligible used goods may account for VAT on its profit margin: the difference between the selling price and the purchase price. The margin is treated as VAT-inclusive.

Margin = 50,600 - 38,000 = 12,600
VAT = 12,600 x 5/105 = AED 600.