Lesson 4 — `0% EX` versus `0% EXT`
Zero-rated and exempt are different treatments, and the FAF gives them different codes: ZR and EX. The trouble is that the two l10n_ae taxes carrying them both read 0% VAT on screen and in every report, so the one signal your eye reaches for is the one signal that cannot separate them. This is the single most confusable point in the whole file, and it is worth more of your attention than any other minute of this course.
The rule is short. 0% EX is the export tax and maps to ZR. 0% EXT is the exempt tax and maps to EX. Map by supply type — what you actually sold and to whom — and never by the "0%".
| Tax | What it is | FAF code | What the tax shows |
|---|---|---|---|
0% EX |
export | ZR |
0% |
0% EXT |
exempt | EX |
0% |
Here is a memory aid that survives a stressful afternoon. The tax whose name ends in T is the exempt one, and it takes the code EX. The shorter name, 0% EX, is the export one, and it takes ZR. The names and the codes are crossed, which is exactly why a quick glance gets it wrong — EX on a tax name and EX as a FAF code mean opposite things.
Now watch what a mis-map does to a real quarter. Al Quoz Industrial Supplies LLC sold at the standard rate in the UAE, exported to a customer outside the GCC, and made one exempt supply. Correctly mapped, its Customer Supply Listing reads like this.
| FAF code | Source tax | Net (AED) | VAT (AED) |
|---|---|---|---|
SR |
5% |
2,480,000.00 | 124,000.00 |
ZR |
0% EX |
640,000.00 | 0.00 |
EX |
0% EXT |
180,000.00 | 0.00 |
| Total | 3,300,000.00 | 124,000.00 |
Now bind 0% EX to EX by mistake. The exports stop being zero-rated supplies and join the exempt ones, so the file reports 820,000.00 as exempt and nothing at all as zero-rated. Look at what does not change: the standard-rated line is untouched, the net total is still 3,300,000.00, and the VAT total is still 124,000.00 — because 0% of anything is nothing either way. The file balances, the totals tie, and the return of a business that exports a fifth of its output now describes a business that exports nothing.
The failure mode: reviewing the file by its VAT column. Every check that looks at tax amounts will pass, because no tax amount moved. The only review that catches this compares the ZR and EX section totals against your own zero-rated and exempt supply figures for the same period. Do that before the file leaves the building, every time, and if the two codes disagree with your VAT working, fix the mapping rather than the working.