Exempt and outside the scope supplies
No VAT is charged in respect of exempt supplies, however, they are not “taxable supplies” which mean that the supplier cannot recover the VAT incurred on expenses related to exempt supplies.
List of exempt supplies:
Financial services: exchange of currency, LC, debt security, equity security, loan, operation of deposit or saving AC, dividend.
Residential building (other than the first supply)
Local transport (public)
Supplies outside the scope of UAE VAT
Those are supplies that are neither taxable supplies nor exempt supplies.
Salaries and wages
Transactions between businesses within the same tax group
Sale or purchase of a business as a going concern
Tips paid above the total charge
Supplies take place outside the UAE