11. Exports

This section discusses the scope of exports made from the UAE.

Export of goods

The place of the supply of goods is the location of the goods at the time of sale of goods. Therefore, in case of export of goods, where a seller sells goods from the UAE to abroad, the place of supply of the goods is in the UAE.

The exporter must retain evidence that goods have been transported from GCC territory within 90 days of the supply taking place, to be able to apply the zero-rate. The documentation required as an evidence of export is official and commercial evidence.

If the supplier can provide the necessary evidence that the sale is an export of goods then VAT applies at the rate of 0%. Otherwise, the sale will subject to VAT at a standard rate of 5%.

The UAE distinguishes between direct exports, and indirect exports. With direct exports, the seller is responsible for the transport. With indirect exports, the buyer is responsible for arranging collection of the goods from the seller and exporting the goods. In practice, due to regulatory requirements, it is highly unlikely that a foreign buyer can export from the UAE. Therefore, in practice, often agents are used.

The amount of the exported goods is required to be reported in ‘box 4' of the VAT return for zero-rated supplies.

Export of services

As explained above in the import of services section, the place of supply for services provided by a supplier who is resident in the UAE will be considered taking place in the UAE.

Therefore, any services provided by a UAE supplier to a recipient abroad will be considered as export of services unless the services fall under the special place of supply rules. The UAE therefore did not apply the GCC VAT Treaty rules, which determine that the place of supply of such a services is abroad, rather than in the UAE.

The UAE has posed very restrictive conditions to the application of the zero rate for exports of services to a foreign recipient. This foreign recipient needs to be outside the UAE when the services are performed for example. The recipient can be in the UAE for a short term presence of less than a month, if also the presence the recipient had is not effectively connected with the supply.

This above provision is applicable as from 4 June 2020 following the amendment made by Cabinet Decision No. 46 of 2020 issued on 4 June 2020. According to the FTA, the text is immediately applicable, although it was only published in the Official Gazette on 15 June 2020. The only amendment made to the text is changing "or" into "and". Although seemingly insignificant, the practical consequences can be far reaching, as we describe here.

Additionally, the services cannot be supplied directly in connection with real estate situated in the State or any improvement to the real estate or directly in connection with moveable personal assets situated in the State at the time the Services are performed.

Finally, the transaction needs to meet a type of anti-abuse test, where the transaction is nonetheless standard rated when the services is received in the UAE by another Person linked to the non resident recipient of the service, and this other Person in the UAE would not have a full right to recover input VAT.

The services provided to a recipient who is outside the UAE and which meet the above criteria will be reported in ‘box 4' of the VAT return for zero-rated supplies. Otherwise, the supply of services in the UAE will subject to VAT at a standard rate of 5%.

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