With the UAE’s strategic geographic location and robust infrastructure, many businesses based in the country offer services to international clients. Whether it’s IT consulting, financial advisory, design, marketing, or professional services, understanding the VAT treatment of such exports is essential for compliance and optimal tax planning.
In this blog, we dive deep into the rules governing the export of services from the UAE under the Federal Decree-Law No. (8) of 2017 on Value Added Tax and the Executive Regulations. We also explain the concept of zero-rating, eligibility criteria, documentation requirements, and how businesses can avoid common pitfalls.
Need help structuring your invoices for zero-rated export services? Reach out to PEAK Business Consultancy Services—a trusted partner for VAT and Corporate Tax compliance in the UAE.
1. Understanding VAT on Exported Services
Generally, the UAE VAT regime distinguishes between services provided domestically (subject to 5% VAT) and those considered as exports, which may be zero-rated. Zero-rating means that the services are taxable at a 0% rate, allowing businesses to claim input VAT on related expenses while not charging output VAT to foreign clients.
This treatment helps keep UAE service exporters globally competitive while ensuring that input tax credits are not lost.
2. Key Conditions for Zero-Rating Exported Services
To qualify for zero-rating, all the following conditions under Article 31 of the Executive Regulations must be met:
- The recipient of the services must be located outside the UAE at the time the services are performed.
- The recipient must not have a place of residence or presence in the UAE.
- The benefit of the services should not be received within the UAE.
- The services must not be related to real estate or events taking place inside the UAE.
Example: A UAE-based IT company providing software development services to a company based in Germany can zero-rate the supply, provided the German company does not have a UAE office and the services are fully consumed abroad.
Still unsure about eligibility? Contact PEAK Business Consultancy Services to assess and verify if your service qualifies for zero-rating under UAE VAT law.
3. Documentation Required for Zero-Rating
To justify applying the 0% rate, businesses must retain the following records as per FTA guidelines:
- Valid tax invoice issued to the foreign client
- Proof of client’s location outside the UAE (e.g., passport, trade license, business registration documents)
- Contracts or service agreements showing where the benefit of the service is received
- Communication records (emails, deliverables, etc.) proving delivery and usage outside UAE
Failure to maintain this documentation can result in the FTA rejecting zero-rating and assessing VAT with penalties.
4. Exceptions: When Exported Services Are Not Zero-Rated
There are situations where services supplied to non-residents do not qualify for zero-rating. These include:
- Services that are physically performed in the UAE and consumed by the recipient while in the country
- Hospitality, catering, or event services delivered inside UAE territory
- Legal services related to UAE-based disputes or real estate
These are considered standard-rated services and are subject to the 5% VAT even if the customer is foreign.
5. Claiming Input Tax on Zero-Rated Services
Since zero-rated supplies are taxable (albeit at 0%), businesses are allowed to claim input VAT incurred on associated expenses. For example:
- Office rent and utilities
- Technology and communication tools
- Professional fees (legal, audit, etc.)
- Marketing and consultancy services
Ensure that input VAT is recorded correctly in the VAT return to maximize recoveries. For expert handling of your VAT return filing and documentation, rely on PEAK Business Consultancy Services.
6. VAT Return Filing for Exporters
In the UAE, businesses file VAT returns either monthly or quarterly. While reporting exported services, companies must:
- List zero-rated sales in Box 3 of the VAT return form
- Ensure all supporting evidence is available for FTA audits
- Reconcile sales invoices with bank receipts
Any discrepancy between declared sales and proof of export may trigger inquiries or penalties.
7. How PEAK Business Consultancy Services Can Support Exporters
As a leading VAT and Corporate Tax advisory firm in the UAE, PEAK Business Consultancy Services provides comprehensive support for service exporters, including:
- Review of your contracts and transaction structure
- Zero-rating eligibility assessment
- Preparation of compliant tax invoices
- VAT return filing and documentation review
- Audit support and FTA response handling
We help UAE-based exporters stay compliant, maximize input VAT recovery, and reduce risk exposure.
8. Summary and Final Thoughts
Exporting services from the UAE offers a competitive advantage when structured with zero-rated VAT treatment. However, the conditions for zero-rating must be strictly met, and thorough documentation must be maintained. Incorrect classification or failure to comply with FTA guidelines can result in penalties or loss of input VAT claims.
Whether you’re an established service exporter or a startup expanding globally, PEAK Business Consultancy Services is here to help. Our experienced consultants guide you through the complexities of VAT, ensuring you’re not just compliant—but also financially efficient.
