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Shades of Taxation: Navigating VAT on UAE’s Sunscreen Domestic Supplies

August 8, 2023

In the dazzling world of taxation, some topics radiate more than others. Amidst the desert sun, the UAE’s VAT treatment on sunscreen products stands out. Introduced in 2018, the VAT system in the UAE has brought about considerable debates, especially regarding the zero-rating of certain products and services. Sunscreen, a critical product to protect against the relentless sun, emerges as a pivotal subject in this discussion. This article sheds light on the tax implications of sunscreen supply within the UAE, comparing it with global perspectives, while diving deep into legislative definitions and interpretations.

In line with the broader fiscal strategy, the United Arab Emirates (“UAE”) heralded a pivotal shift in its taxation framework on January 1, 2018, with the introduction of the Value-Added Tax (“VAT”) at a standard rate of 5%, complemented by a 0% reduced rate. As detailed in Article 45 of the Federal Decree-Law No. 8 of 2017, inclusive of its subsequent amendments, (“VAT Decree-Law”), there exist 14 distinct categories of goods and services eligible for the preferential 0% VAT treatment. This zero-rating mechanism empowers suppliers by facilitating the reclamation of pertinent input VAT without the obligation to levy the output VAT upon their customers.

The decision by a sovereign state to earmark certain supplies for zero-rating is typically a product of multifaceted deliberations. Key considerations encompass economic and social imperatives, the resultant consumer behavior, intrinsic attributes of the goods or services, overarching policy objectives, among others.

A salient provision within the categories is captured in Article 45(14) of the VAT Decree-Law, which designates the “supply of preventive and basic healthcare Services and related Goods and Services” for zero-rating, in line with the stipulations of the Decree-Law’s Executive Regulation.

This discourse endeavors to offer a comprehensive analysis of the UAE’s VAT stance concerning the domestic supply of sunscreen products. The exploration is anchored in a tripartite examination encompassing global viewpoints, the prevailing legislative corpus, and the Publications of the UAE’s Federal Tax Authority (“FTA”).

International Perspective

Internationally, the VAT treatment of the supply of sunscreen products in VAT-implementing states (or states that implement a similar sales tax) varies considerably. The following VAT treatments of supplies of sunscreen products appear to be adopted by different jurisdictions internationally:

  • Subject to the standard rate of VAT (Tax liability borne by the end consumer).
  • Subject to a reduced rate of VAT (Tax liability born by the end consumer).
  • Subject to 0% VAT (Tax liability borne by the Government).
  • Exempt from VAT (Tax liability borne by the supplier).

As for the states of the Gulf Cooperation Council (“GCC”) – which include the UAE – , we refer to the Common VAT Agreement of the States of the GCC (“GCC Agreement”), which states in Article 31(II) that “Medicines […] shall be subject to the zero-rate in accordance with unified provisions proposed by the Committee of Ministers of Health and approved by the Financial and Economic Cooperation Committee”. 

At the time of publishing this article, “unified provisions” for the purposes of Article 31(II) of the GCC Agreement have not been published to date. 

However, the GCC Agreement does not dive into further details on what a ‘medicine’ is for VAT purposes. Ultimately, if a sunscreen product was classified as a ‘medicine’ in a GCC state, it is likely that it will be subject to VAT at the zero-rate unless otherwise stated or required in the domestic legislation.

UAE’s Tax Legislation

While the UAE’s legislation does not explicitly state the UAE VAT treatment of sunscreen products, it does regulate the zero-rating of medical products (both medicines and medical equipment). The corner-stone provision is that of Article 45(14) of the VAT Decree-Law, which zero-rates the goods related to the supply of preventive and basic healthcare services, with reference to further details specified in the VAT Decree-Law’s Executive Regulation.

In accordance with the reference to the Executive Regulation within Article 45(14) of the VAT Decree-Law, Cabinet Decision No. 52 of 2017 on the Executive Regulation of the VAT Decree-Law, and its amendments (“VAT Executive Regulation”) provided further details and provisions that regulate the VAT treatment of the supply of ‘medicine’.

Article 41(4) of the VAT Executive Regulation zero-rates a supply of the following categories of goods inter alia:

  • Pharmaceutical products identified in a decision issued by the UAE’s Cabinet of Ministers. 
  • Goods supplied in the course of supplying a person with zero-rated healthcare services that are necessary for the supply of such healthcare services.

In other words, the supply of sunscreen products may qualify for zero-rating if it fits into one of the two categories listed above. Each of the above categories is discussed in further detail in the sections below.

It is important to note that the below analysis must be conducted for each sunscreen product separately in order to determine the correct UAE VAT treatment of that product. Different sunscreen products may well be subject to different VAT treatments depending on the extent to which they meet the legislative requirements.

Pharmaceutical products identified in a decision issued by the Cabinet of Ministers

Further to the reference made in Article 41(4)(a) of the VAT Executive Regulation, the UAE’s Cabinet of Ministers has issued Cabinet Decision No. 56 of 2017 on Medications and Medical Equipment Subject to Tax at Zero Rate (“CD No. 56”).

For the purposes of zero rating a supply of a sunscreen product under this category, CD No. 56 requires that:

  • The sunscreen product meets the definition of “Medication”.
  • The sunscreen product is registered with the Ministry of Health and Prevention (“MOHAP”) or imported with its permission or approval.

Both of the above requirements must be met with sufficient evidentiary documents retained by the business to back up the zero-rating treatment.

  1. Definition of “Medication”

As discussed above, for a sunscreen product to qualify for VAT at 0% in the UAE, it must meet the definition of a ‘medication’ for the purposes of CD No. 56. 

CD No. 56 defines medication as “Every product containing a substance(s) which achieves the intended objective in or on the human body via biological effect, which is produced, sold or offered for use in cases relating to diagnosing, treating, healing, relieving or preventing diseases, or renewing, correcting or rehabilitating the function of body organs”. 

Taking the above into consideration:

  • Most sunscreens are applied to the skin (on the body) and may be absorbed by it (in the body) in order to achieve the intended objective. 
  • Sunscreen products may or may not achieve their objective via ‘biological effect’. The term ‘biological effect’ has not been defined in the UAE’s tax legislations or FTA’s publications. On one hand, ‘biological effect’ may be interpreted as requiring an interaction between the human body and the medication (for example, by way of absorption). On the other hand, the term might be interpreted as triggering a response by the human body or affecting its functions (hence, sunscreen products that merely ‘shield’ the skin against harmful radiation may not meet the definition of medication).
  • Most sunscreen products are produced, sold, or offered for multiple purposes (usually a combination of purposes). These purposes can be medical (e.g. preventing skin cancer, sunburns, and pigmentation) or cosmetic (reduce signs of aging). For this reason, it is important to consider the main purpose(s) of each sunscreen product. For example, if a sunscreen product’s main purpose is not to prevent skin diseases, but instead to reduce signs of aging as evidenced from marketing material, that sunscreen product may not meet the definition of ‘medication’. 
  1. Registration of the sunscreen product with the MOHAP or import with its permission or approval

For the purposes of zero-rating a sunscreen product for UAE VAT purposes under CD No. 56, that sunscreen product must at least meet one of the two following requirements:

  1. The sunscreen product is registered with the MOHAP – i.e. the supplier must retain a registration certificate issued by the MOHAP confirming the registration of that specific sunscreen product. It is noted that such registration must be valid at the time of supply in order to benefit from the zero-rating treatment.
  2. The sunscreen product is imported with the MOHAP’s permission or approval – i.e. the supplier must retain documentation that proves the MOHAP’s permission or approval to import that sunscreen product. Where this is the case, and the purchaser is a business that intends to resell the sunscreen product, the purchaser must ensure to obtain a copy of the MOHAP’s permission or approval.

If neither of the above cases apply to the sunscreen product, it might not qualify for zero-rating under the current UAE’s VAT regime even if it meets the definition of ‘medication’ addressed above.

Goods supplied in the course of supplying a person with zero-rated healthcare services that are necessary for the supply of such healthcare services

For the purposes of the reference made in Article 41(4)(c) of the VAT Executive Regulation, even where a sunscreen product fails to meet the requirements of the abovementioned CD No. 56, a sunscreen product may still qualify for VAT at the 0% if the sunscreen product is “supplied in the course of supplying a person with zero-rated healthcare services that are necessary for the supply of such healthcare services”.

Hence, for the purposes of zero-rating the supply of a sunscreen product under Article 41(4)(c) of the VAT Executive Regulation, both of the following requirements must be met:

  1. The sunscreen product must be supplied in the course of supplying healthcare services that meet the requirements for zero-rating under the UAE tax legislation. 
  2. The sunscreen product must be ‘necessary’ for the supply of such healthcare services. This may be understood as meaning that the sunscreen product must be critical for the successful accomplishment of the healthcare service taking into consideration the recipient’s individual circumstances and situation.

For example, the above requirements may be met in instances where the sunscreen product is provided by a qualifying healthcare professional as part of a qualifying preventative treatment plan for individuals at a higher risk of diseases related to sun exposure while being treated for a similar condition. 

It is not explicitly clear at this point whether the supply of the sunscreen product would still qualify for zero-rating if it was not made by the same supplier of the healthcare services (e.g. a doctor writes a prescription which the patient uses at a separate pharmacy), however, this is not likely the case.

Adopting a Conservative Approach

When determining whether a sunscreen product is subject to VAT at the standard rate of 5% or 0%, businesses may choose to adopt a conservative approach and apply VAT at the standard rate of 5% rather than 0% to avoid unforeseen tax liabilities and relevant administrative penalties. However, adopting such a conservative approach may give competitors an edge, permitting them to benefit from lower prices due to zero-rating their sunscreen products. Moreover, businesses may still be penalized for other violations, such as the submittal of an incorrect tax return to the FTA.

Considering the above, businesses are encouraged to seek tax advice on the VAT treatment of their sunscreen products to ensure compliance with the law without giving competitors an unnecessary advantage in the market.

Navigating the complexities of VAT application on sunscreen products can be like threading a needle in a dynamic marketplace. While the option to apply a standard VAT rate of 5% might appear as the safer harbor, it’s crucial to discern the bigger picture. Businesses leaning towards a conservative 5% rate to sidestep potential tax pitfalls might inadvertently open doors for competitors to shine brighter with competitive pricing through zero-rating.

Remember, the flip side of conservatism could also entail unforeseen repercussions – like incorrect tax return submissions, making you susceptible to FTA’s scrutiny.

For businesses striving for both compliance and competitiveness, the path isn’t confined to self-guided decisions. The UAE’s Federal Tax Authority (FTA) serves as a beacon of clarity and guidance. Furthermore, the competent court stands as another viable avenue for seeking interpretations on tax nuances.

To ensure you’re bathing in the sunlight of compliance while not casting shadows on your market positioning, it’s prudent to delve deep into expert tax counsel. Such guidance can illuminate the most fitting VAT treatment for your sunscreen products, harmonizing legal alignment with market competitiveness.


Navigating the balance between fiscal responsibilities and market competitiveness is a nuanced journey for businesses. In these shifting sands, consulting with tax/legal experts isn’t merely advisable – it is pivotal. Keeping pace with the UAE’s ever-evolving tax landscape isn’t just about business growth; it is also about reinforcing the nation’s economic backbone. When faced with doubts, leaning on seasoned legal or tax professionals can provide clarity, ensuring the safeguarding of your enterprise’s standing and the nation’s financial trajectory.

This Article is prepared by Mohamed El Baghdady, Head of Tax and Financial Crimes, and Marwan Alnooryani, Senior Tax Associate, at Habib Al Mulla & Partners Law Firm.

Seek Legal Counsel

Our expertise in tax law and regulations allows us to provide clients with effective and accurate tax advice, taking into consideration their unique circumstances and needs. Additionally, our experience and knowledge in handling tax disputes enable us to represent clients in discussions with tax authorities, as well as in court proceedings. 

Our track record of successfully resolving tax disputes and helping clients minimize their tax liabilities has likely earned us a reputation as a trusted and reliable tax advisor. Our tax and financial crimes team, led by our Head of Tax and Financial Crimes, Mohamed El Baghdady, has successfully advised and represented clients across various industries, including, but not limited to, consumer goods and retail, services, real estate, oil & gas and banking and finance, before the government authorities, tax tribunals and courts. Our clients have been successful in multiple tax disputes before the committees and courts.

For further information, please contact, Mohamed El Baghdady, Head of Tax and Financial Crimes, on or any of the members of our team.

Mohamed El Khatib

Principal Partner – Head of Disputes

Mohamed ElBaghdady

Senior Associate

Marwan Alnooryani

Senior Associate

Basem Ehab


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