“My client is abroad, so I zero-rate it.” That sentence has cost UAE businesses a great deal of money. Exporting services at 0% is real and available, but the conditions are narrower than most people assume — and the FTA tests them on the facts, not on the invoice address.
The conditions, in the order they are tested
Article 31 of the Executive Regulation sets out when a supply of services qualifies for the zero rate as an export. The core test has two limbs that must both hold.
- The recipient does not have a place of residence in an Implementing State, and
- the recipient is outside the UAE at the time the services are performed.
Then two exclusions. The services must not be supplied directly in connection with:
- real estate situated in the UAE, including improvements to it; or
- moveable personal property situated in the UAE at the time the services are performed.
A further requirement has since been added: the services must not be treated as performed in the UAE or in a designated zone under the special place-of-supply rules in the Decree-Law.
Fail any one of these and the supply is standard-rated at 5%. There is no partial zero-rating and no reasonable-belief defence that survives a document request.
What “outside the State” actually means
This is the condition most often misread. It does not mean the customer is a foreign company. It means the recipient was physically outside the UAE when the services were performed.
The Regulation gives a working test: a person is treated as outside the State where their presence in the UAE is less than 30 days and that presence is not effectively connected with the supply. Both halves matter. A client who spends 10 days in Dubai specifically for the project you are billing is not outside the State for that supply, even though 10 is less than 30.
Multiple establishments
Where the recipient has establishments in more than one country, you have to identify the establishment most closely connected with the supply. A UK parent with a Dubai subsidiary that actually receives and uses the service is not an export, however the contract is addressed.
And the Regulation puts the obligation on you: the supplier must consider all available facts to establish residency and location. “The invoice says London” is not considering the facts.
Where it goes wrong
| Situation | Likely treatment | Why |
|---|---|---|
| Consultancy for an overseas client, delivered remotely, client never in the UAE | 0% | Both limbs met, no UAE property or goods involved |
| Same client, but they fly in for the workshops you are billing | 5% | Presence effectively connected with the supply |
| Design work for a foreign developer’s Dubai tower | 5% | Directly connected with UAE real estate |
| Repair or inspection of goods sitting in a UAE warehouse | 5% | Moveable property situated in the UAE at the time |
| Contract with a foreign parent; the Dubai subsidiary receives the benefit | 5% | Establishment most closely connected is in the UAE |
| Marketing services to a GCC company in a state that applies VAT | Check | The Implementing State limb needs to be tested, not assumed |
The real estate exclusion is broader than people expect. “Directly in connection with” captures architecture, engineering, surveying, project management and agency work on a specific UAE property — not merely conveyancing.
What you need to hold
Zero-rating is a position you have to be able to defend two or three years later, usually to someone who was not in the room. Keep, per engagement:
- The contract or engagement letter, showing the contracting entity and where it sits
- Evidence of the recipient’s place of residence — incorporation documents, tax registration abroad, registered address
- A note of where the recipient was while the services were performed, and of any UAE visits and their purpose
- A record of which establishment was served, where the group has several
- The tax invoice, carrying the right treatment and the required content
That file is cheap to build at the time and nearly impossible to reconstruct afterwards. It is the single most useful habit for any UAE business with overseas clients.
Services and goods are not the same test
Exporting goods is a separate regime with its own evidence requirements — customs documentation, proof of physical export within the permitted window. If you supply both, do not apply one rulebook to the other. See zero-rated exports of goods.
If you have been zero-rating wrongly
This is recoverable, and it is much better handled by you than discovered by the FTA. Quantify the exposure across the open periods, then use voluntary disclosure. A business that corrects itself is in a materially different position from one that is corrected during a tax audit.
The commercial problem is usually the awkward one: you charged the client 0%, and now you owe 5% you cannot easily pass on. That is a reason to get the analysis right at the quoting stage, not a reason to leave it.
Frequently asked questions
Where the recipient has no place of residence in an Implementing State and is outside the UAE at the time the services are performed, and the services are not supplied directly in connection with UAE real estate or with moveable personal property situated in the UAE at that time. A further condition requires that the services are not treated as performed in the UAE or in a designated zone under the special place-of-supply rules.
The Regulation treats a person as outside the State where their presence in the UAE is less than 30 days and that presence is not effectively connected with the supply. Both halves apply. A client who spends ten days in the UAE specifically for the project you are billing is not outside the State for that supply.
No. The place of residence test is only the first limb. You also need the recipient to be outside the UAE while the services are performed, and where the group has several establishments you must identify the one most closely connected with the supply. A foreign parent contracting on behalf of its Dubai subsidiary that actually receives the service is not an export.
No. Services supplied directly in connection with real estate situated in the UAE are excluded from zero-rating, and that exclusion is read broadly. Architecture, engineering, surveying, project management and agency work on a specific UAE property are standard-rated regardless of where the client sits.
The contract showing the contracting entity, evidence of the recipient place of residence such as foreign incorporation or tax registration, a record of where the recipient was while the services were performed including any UAE visits and their purpose, a note of which establishment was served, and the tax invoice carrying the correct treatment. Build it at the time; it cannot be reconstructed later.
Quantify the exposure across the open periods and correct it through voluntary disclosure. A business that corrects itself is treated materially differently from one corrected during an FTA audit. The hard part is usually commercial rather than technical: recovering 5% from a client you already invoiced at 0%.