Exempt supplies UAE: financial services, residential property, bare land and local transport

You ask in plain English, the AI does the bookkeeping work, and you or your accountant approve the result.

• You ask: “How much input VAT did we pay this year on costs that relate to our residential rentals?”
• The AI agent: HelloBooks totals input VAT on bills coded to the residential property class, separates shared overheads, and shows a draft split of the shared VAT using the ratio your accountant has set.
• You review: Your accountant confirms the apportionment method and the year-end adjustment before any figure goes into a return.

Article 46 of Federal Decree-Law No. 8 of 2017 exempts four groups. Certain financial services are the first. Residential buildings sold or leased, other than those zero-rated under Article 45, are the second. Bare land is the third, and local passenger transport is the fourth.

In practice: a landlord in Al Nahda renting flats to families charges no VAT on the rent. A bus operator running routes inside the emirates charges none on fares. A bank's margin-based products are typically exempt, while its fee-based services may not be.

• Certain financial services
• Residential buildings sold or leased (outside the zero-rated cases)
• Bare land
• Local passenger transport

Input VAT is recoverable under Article 54(1) of the Decree-Law when the goods or services are used to make taxable supplies. Costs used for exempt supplies do not meet that test. A landlord who pays AED 40,000 plus AED 2,000 VAT for repainting residential units cannot reclaim the AED 2,000, so the true cost of the job is AED 42,000.

Many businesses make both kinds of supply: a property company with residential and commercial units, or a firm earning exempt interest alongside fees. Article 58 of the Decree-Law leaves the method for splitting shared input tax to the Executive Regulation. Article 55 of the Regulation requires a calculation at the end of each tax year, and Article 55(11) requires an adjustment where the difference exceeds AED 250,000.

Direct costs are easy: VAT on commercial-unit repairs is recoverable, VAT on residential-unit repairs is not. Shared overheads such as the head office rent and the accounting software need the agreed ratio.

HelloBooks lets you tag sales and costs by class or project, so residential and commercial activity sit apart in the same ledger. The AI agent codes bills to the right class from the supplier and description, and asks when it is not sure. Shared input VAT can then be split by your accountant's ratio with a journal. Property groups that want a chart of accounts or reports built around this split can email hello@hellobooks.ai.