Which VAT type is my invoice? A plain decision guide

In short

Every invoice line has one VAT treatment: standard rated, zero rated, exempt, out of scope or reverse charge. Work out which one applies to each kind of sale you make before you send sample invoices to Calculus. Your finance team does this once per kind of sale, not once per invoice.

Why eInvoicing needs it

Each line of an eInvoice carries a VAT category code. The code tells your customer and the Federal Tax Authority (FTA) why the line has the VAT it has. The MoF UAE Electronic Invoicing Guidelines name the treatments: standard rate, zero rated, exempt, outside the scope of VAT, reverse charge and profit margin scheme.

The code also decides the document type. A sale with VAT, or with zero-rated or reverse-charge lines, goes on a tax invoice. A document where every line is exempt or out of scope goes on a commercial invoice, the document type for supplies that do not need a tax invoice.

The most common mistake we see is printing "0%" or "Zero Rated" on everything that is not at 5%. On a paper invoice the total looks the same. On an eInvoice the wrong code means a wrong VAT return figure, and some combinations are rejected outright. Getting this right before you send samples means the register Calculus builds for you reflects how you really trade.

What good looks like

Answer the questions in order, for each kind of sale. Stop at the first "yes".

#	Question	If yes	Code
1	Is your business not registered for VAT, or are the goods outside the UAE when you sell them and never enter the UAE through you?	Out of scope. Issue a commercial invoice out of scope of tax. See goods that never enter the UAE	O
2	Is the buyer another member of your own VAT group?	Out of scope. See sales within a VAT group	O
3	Are you passing on a cost you paid strictly in your customer's name, at exact cost?	Possibly a disbursement, out of scope. Most recharges are not. See recharge or disbursement	O
4	Is it gold, silver, platinum, palladium, diamonds, pearls, rubies, sapphires or emeralds, sold to a VAT-registered buyer who declares it is for resale or manufacturing?	Reverse charge: the buyer accounts for the VAT. See reverse charge on gold and diamonds	AE
5	Are the goods leaving the UAE, or is it a service to a customer abroad, or international transport?	Zero rated, with the reason	Z
6	Is it one of the exempt supplies: certain financial services, residential rent or sale, bare land, or local passenger transport?	Exempt, with the exemption reason	E
7	None of the above?	Standard rated at 5%	S

Some examples, all invented:

Sale by Al Noor Trading LLC	Treatment
Spices sold to a restaurant in Sharjah	S, 5%
Spices shipped by sea to a buyer in Oman, with exit papers kept	Z, export of goods
Rice bought in India and shipped straight to a buyer in Qatar	O, commercial invoice
Warehouse rent recharged to a customer	S, 5% (a recharge, not a disbursement)
Rent on a flat let to an employee	E, residential

If one invoice mixes treatments, each line gets its own code. A tax invoice may carry standard-rated and zero-rated lines together. Full detail on codes and reasons is in VAT category and reason on every line.

How to fix it in Tally

1. List the kinds of sale you make (local, export, rent, recharge, and so on).
2. Answer the questions above for each one and write down the code.
3. Check that each kind of sale posts to a sales ledger whose VAT details match that code. Open a ledger with Alt+G, Alter Master, Ledger.
4. Where one ledger mixes treatments, split it into one ledger per treatment.
5. Send Calculus one sample invoice for each kind of sale.

How to fix it in Excel or another system

Add a "VAT type" column to your sales list with a dropdown of S, Z, E, O and AE. Fill it for one invoice of each kind of sale, for example "Z". ERP users: ask your ERP partner to map each tax code to one of these five categories.

Checklist

• List every kind of sale your business makes
• Classify each one with the questions above
• Stop printing "0%" or "Zero Rated" as a catch-all
• Note any case you are unsure of and ask your tax advisor
• Send Calculus one sample invoice per kind of sale

The law

• Federal Decree-Law No. 8 of 2017 on Value Added Tax (VAT Law), Article 45: zero-rated supplies, including exports of goods and services and international transport.
• VAT Law, Article 46: exempt supplies (financial services, residential buildings, bare land, local passenger transport).
• VAT Law, Article 14 (Tax Group registration); Executive Regulation, Article 12(1)(b): a supply by one member of a Tax Group to another member may be disregarded.
• VAT Law, Article 48, and Cabinet Decision No. 127 of 2024 on the reverse charge mechanism for precious metals and stones, in force from 25 February 2025 (repealing Cabinet Decision No. 25 of 2018).
• Ministry of Finance, UAE Electronic Invoicing Guidelines, Version 1.1 (1 June 2026): the tax categories and the commercial invoice for supplies that need no tax invoice. MoF PDF
• Peppol PINT AE specification: VAT category code (IBT-118, IBT-151) and invoice type code (IBT-003). docs.peppol.eu