VAT

UAE VAT on the Export of Services

2025-10-13 · 5 min read · By Aureus Worldwide

For UAE service businesses with overseas clients, consultancies, agencies, software firms, professional services, the export of services rules are commercially important. Where the conditions are met, exported services can be zero-rated, meaning no VAT is charged but input VAT can still be recovered. But zero-rating is conditional, and applying it wrongly is a common source of FTA assessments. This guide explains when service exports qualify for zero-rating and the evidence you need.

Why zero-rating matters

Zero-rating is the best of both worlds for an exporter: you charge 0% VAT on the supply, so your overseas client pays no UAE VAT, and you can generally still recover input VAT on your related costs. That is different from an exempt supply, where no VAT is charged but input VAT is generally not recoverable. For a service exporter, getting into the zero-rated category, rather than mistakenly treating a supply as standard-rated or exempt, directly affects competitiveness and cash. The general treatment of services is covered in our VAT on services guide.

First question: where is the service supplied?

VAT only applies to services supplied in the UAE, so the place of supply rules come first. For many services, the place of supply is where the supplier has its place of residence, but there are important special rules, including for services connected to real estate, telecommunications, electronic services and others, where the place of supply follows different tests. You must determine the place of supply before deciding whether export zero-rating is even relevant.

The conditions for zero-rating exported services

Where a service is supplied in the UAE to an overseas recipient, it can be zero-rated broadly where conditions such as the following are met:

These are general positions; the precise conditions are detailed and have exceptions, so confirm them with the FTA before applying the zero rate.

The recipient must genuinely be outside the UAE

The recurring theme is the recipient's status and location. Zero-rating is intended for genuine exports, services consumed abroad by a person outside the UAE. If the recipient has a UAE establishment that is connected to the supply, or is actually in the UAE when the service is performed, the export treatment can fail and 5% may apply instead. This is why simply having an overseas client on the invoice is not enough; you must establish that the recipient is genuinely outside the UAE in relation to that supply.

Zero-rating is not a function of where you send the invoice. It depends on where the recipient is, whether they have a connected UAE establishment, and where the service is actually consumed.

Services that usually cannot be zero-rated as exports

Certain services do not qualify for export zero-rating even where the client is overseas, including broadly:

• Services directly connected with UAE real estate (the place of supply follows the property)
• Services relating to goods physically located in the UAE at the time
• Services that are performed or enjoyed in the UAE, such as some on-the-ground services
• Certain services with special place-of-supply rules that locate them in the UAE

For these, the UAE treatment applies regardless of the client's location, so test the category carefully.

The evidence you must keep

Because the FTA can challenge zero-rating, evidence is essential. Keep records that demonstrate the conditions were met, such as:

1. Contracts and engagement letters showing the overseas recipient and scope
2. Correspondence and details establishing the recipient is outside the UAE
3. Evidence of the recipient's place of residence and any UAE establishment
4. Documentation that the service does not relate to UAE real estate or goods
5. Valid tax invoices reflecting the zero-rated treatment

Without this evidence, the FTA can treat a supply you zero-rated as standard-rated and assess the VAT, plus penalties. Robust accounting records are your protection.

Don't confuse zero-rated with out of scope

A subtle but important point: a supply can be out of scope (place of supply outside the UAE entirely), zero-rated (supplied in the UAE but rated at 0% as an export), or standard-rated (5%). These are different categories with different reporting and recovery consequences. Determine which one applies to each supply rather than lumping all overseas work together, and reflect each correctly in your VAT return.

A note on changeable detail

The place-of-supply rules, the conditions for export zero-rating and the evidence the FTA expects are detailed and can be refined through guidance. Treat this guide as the framework and confirm the treatment of specific service exports with the FTA or a qualified adviser before applying the zero rate.

How Aureus Worldwide helps

Aureus Worldwide helps UAE service exporters determine the place of supply, test the conditions for zero-rating, and build the evidence file that defends a zero-rated position. Our VAT and accounting teams handle the correct treatment, invoicing and returns, and we direct you to confirm changeable conditions with the FTA. To get your service exports right, contact us.

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