Is VAT charged on crude oil and natural gas?
TI AssistantClear answerTI Pro
No VAT is added on top - crude oil and natural gas are taxed at 0%, so you won't be charged the standard 5%.
Show the full answerShow less
The detail
Under Article 45(12) of the VAT Decree-Law, the supply or import of crude oil and natural gas is zero-rated, meaning VAT applies at 0% rather than being exempt. Separately, where a registrant supplies these goods to another registrant intending to resell them or use them to produce/distribute energy, Article 48(3) shifts the accounting obligation to the recipient under a reverse charge, so the supplier still does not charge VAT on the invoice.12
What the law says
- Article 45(12) applies the zero rate (0% VAT, allowing the supplier to still recover input VAT) to the supply or import of crude oil and natural gas.2
- Article 48(3)-(6) requires the recipient registrant, not the supplier, to account for VAT on crude/refined oil or gas supplies intended for resale or energy production/distribution, subject to written declarations and registration verification.1
What it depends on
- The Article 48(3) reverse charge only applies if the recipient gives the supplier a written declaration confirming intended resale or energy use and confirming its own tax registration, verified by the supplier.1
- If the recipient fails to make these declarations, or the supply also includes other goods/services, or the supply is already zero-rated under Article 45(1) (export), the reverse charge mechanism does not apply and normal VAT rules govern instead.1
Check before you rely on it
- Confirm whether the supply is domestic (reverse charge under Art 48(3)) or an export/import (zero-rated under Art 45)
- If domestic, obtain and keep the recipient's written declaration of registration and intended use before the supply date
Sources (2) — read the official text
-
Article 48 - Reverse Charge20
Read the article
Article 48 - Reverse Charge20 1. If the Taxable Person imports Concerned Goods or Concerned Services for the purposes of his Business, then he shall be treated as making a Taxable Supply to himself, and shall be responsible for accounting for the Due Tax on that Supply and complying with all other Tax obligations arising, with the exception of issuing a Tax Invoice to himself.21 2. As an exception to Clause 1 of this Article, in case the final destination of the Goods when entering the State is another Implementing State, the Taxable Person shall pay the Due Tax on Import of Concerned Goods pursuant to the mechanism specified by the Executive Regulation of this Decree-Law. 3. If a Registrant makes a Taxable Supply in the State to another Registrant of any 19 Article amended as per Federal Decree-Law No. 18 of 2022. 20 Article amended as per Federal Decree-Law No. 18 of 2022. 21 Clause amended as per Federal Decree-Law No. 16 of 2025. Federal Decree-Law No. 8 of 2017 and its amendments – As published by the Ministry of Finance 23 crude or refined oil, unprocessed or processed natural gas, or Pure Hydrocarbons, and the Recipient of these Goods intends to either resell the purchased Goods as crude or refined oil, unprocessed or processed natural gas, or Pure Hydrocarbons, or use these Goods to produce or distribute any form of energy, the following rules shall apply: a. The Registrant making the supply shall not account for Tax on the value of the supply of the Goods referred to in this Clause. b. The Recipient of the Goods shall calculate the Tax on the value of the Goods supplied to him and shall be responsible for all applicable Tax obligations and for calculating the Due Tax in respect of such supplies. 4. The provisions of Clause 3 of this Article shall not apply in any of the following situations: a. Where, before the date of supply, the Recipient of Goods has not provided a written declaration to the supplier that his acquisition of the Goods is for the purpose of resale, or use for production or distribution of any form of energy. b. Where, before the date of supply, the Recipient of Goods has not provided a written declaration to the supplier that he is a Registrant and the supplier has not verified the Tax Registration of the Recipient of Goods by means approved by the Authority based on the data provided in the declaration. c. Where the Taxable Supply would be subject to Tax at the zero rate in accordance with Clause 1 of Article 45 of this Decree-Law. d. Where the Taxable Supply includes a supply of Goods or Services other than the Goods referred to in Clause 3 of this Article. 5. Where a Recipient of Goods of any crude or refined oil, unprocessed or processed natural gas, or Pure Hydrocarbons declares in writing to the supplier that he is a Registrant for the purposes of applying Clause 3 of this Article, the following shall apply: a. The supplier shall not be liable for accounting for the Tax in relation to the supply unless he was aware or supposed to be aware, that the Recipient was not a Registrant at the date of supply. b. The Recipient shall be liable for the calculation of Due Tax in respect of the supply. 6. If the supplier mentioned in Paragraph (a) of Clause 5 of this Article is supposed to be aware that the Recipient of Goods was not registered at the date of supply, the supplier and the Recipient of Goods shall be jointly and severely liable for any Due Tax and relevant penalties in respect of the supply. 7. The Executive Regulation of this Decree-Law shall specify: Federal Decree-Law No. 8 of 2017 and its amendments – As published by the Ministry of Finance 24 a. Conditions and instances where the mechanism in Clause 1 of this Article applies. b. Additional obligations related to record keeping in relation to accounting for Tax according to the mechanism in Clause 1 of this Article. 8. The Cabinet may issue a decision specifying other Goods or Services that are subject to the reverse charge and specify the relevant conditions and provisions.
-
Article 45 - Goods and Services Subject to Zero Rate18
Read the article
Article 45 - Goods and Services Subject to Zero Rate18 The zero rate shall apply to the following Goods and Services: 1. A direct or indirect Export of Goods and Services to outside the Implementing States as specified in the Executive Regulation of this Decree-Law. 2. International transport of passengers and Goods which starts or ends in the State or passes through its territory, including Transport-related Services. 3. Air passenger transport in the State if it is considered an “international carriage” pursuant to Article 1 of the Warsaw Convention for the Unification of Certain Rules Relating to International Carriage by Air 1929. 4. Supply or Import of air, sea and land means of transport for the transportation of passengers and Goods as per the criteria and conditions specified in the Executive 18 Article amended as per Federal Decree-Law No. 18 of 2022. Federal Decree-Law No. 8 of 2017 and its amendments – As published by the Ministry of Finance 21 Regulation of this Decree-Law. 5. Supply of Goods or Services, or Import of Concerned Goods, related to the supply of the means of transport mentioned in Clause 4 of this Article and which are designated for the operation, repair, maintenance or conversion of these means of transport. 6. Supply or Import of air or sea rescue and assistance aircrafts or vessels. 7. Supply of Goods and Services related to the transport of Goods or passengers aboard air, sea and land means of transport pursuant to the provisions of Clauses 2 and 3 of this Article, designated for consumption on board; or anything consumed by any means of transport, any installations or addition thereto or any other use during transportation. 8. The supply or Import of investment precious metals. The Executive Regulation of this Decree-Law shall specify the precious metals and the standards based on which they are classified as being for investment purposes. 9. The first supply of residential buildings within 3 years of its completion, either through sale or lease in whole or in part, according to the controls specified in the Executive Regulation of this Decree-Law. 10. The first supply of buildings specifically designed to be used by Charities through sale or lease according to the controls specified in the Executive Regulation of this Decree-Law. 11. The first supply of buildings converted from non-residential to residential through sale or lease according to the conditions specified in the Executive Regulation of this Decree-Law. 12. The supply or Import of crude oil and natural gas. 13. The supply of educational Services and related Goods and Services for nurseries, preschool, school education, and higher educational institutions owned or funded by Federal or local Government, as specified in the Executive Regulation of this Decree-Law. 14. The supply of preventive and basic healthcare Services and related Goods and Services, and Import of related Concerned Goods according to what is specified in the Executive Regulation of this Decree-Law. Federal Decree-Law No. 8 of 2017 and its amendments – As published by the Ministry of Finance 22 Chapter Two – Exemptions
Helpful?
Written by AI from the FTA sources above and checked before display. Not tax advice or official FTA information - confirm with a tax adviser before you act. Full disclaimer
Ask your own question
Related questions
- What is the VAT rate in the UAE?
- When did VAT start in the UAE?
- What is VAT and how does it work in the UAE?
- Which goods and services are zero-rated for VAT in the UAE?
- Which supplies are exempt from VAT in the UAE?
- What is the difference between zero-rated and exempt supplies?
- Is VAT charged on food in the UAE?
- Is VAT charged on school fees in the UAE?
Filing Corporate Tax? Free Corporate Tax return guidance, in 5 easy steps