UAE VAT Public Clarification on Zero-Rating of Export of Services

The UAE Federal Tax Authority (FTA) has published a new VAT Public Clarification on the zero-rating of export of services. This follows the publication of an updated version of the Executive Regulations to the Federal Decree-Law №8 of 2017 on VAT (“the Regulations”).

VATP019 provides an overview of the FTA’s view of the zero-rating conditions in Article 31 of the Regulations. A supply of services may only be zero-rated if (1) the recipient does not have a place of residence in an Implementing State and (2) is outside the UAE at the time the services are performed. The Public Clarification provides further clarity on how the FTA interprets ‘outside the State’ in the context of the recent change in the Regulations. Further details are also provided regarding taxpayers’ obligations to determine the facts and circumstances of a transaction before applying the zero rate.

Place of Residence

A recipient of services is regarded as having a place of residence in the UAE if the recipient has either a place of establishment (where it is legally established) or fixed establishment (any fixed place where business is regularly conducted with sufficient human and technology resources). Where a recipient has establishments in multiple jurisdictions, the establishment most closely related to the supply of services must be determined. UAE suppliers are only entitled to apply the zero rate of VAT on services supplied, if the establishment of its recipient, that is most closely connected to the supply, is outside UAE

The Public Clarification sets out criteria to consider in determining the establishment most closely related to the supply where there is uncertainty regarding whether a supply of services is received by a foreign or UAE establishments of a recipient. For more visit https://www.hmaa.ae/blog3.html