Everything You Must Know About VAT on the Export of Services Outside the GCC Region

The introduction of Value Added Tax (VAT) has significantly impacted businesses in the UAE. Came into effect on 1st January 2018, VAT has become a new source of revenue for the government apart from streamlining the economy. The UAE has one of the lowest VAT rates in the region at the standard rate of 5%. However, businesses should be aware of different VAT rates applicable to specific circumstances such as the export of services, for which tax agents in Dubai can help you.

You must know what rate of VAT is applicable on the export of services outside the GCC territory as opposed to the export of goods. Here, you must know how services are defined under VAT and the applicable VAT rate when you first services outside the GCC region. Understanding these key concepts can help you ensure VAT compliance in the UAE and avoid penalties imposed by the Federal Tax Authority (FTA).

This article explains in detail the VAT applicability of the export of services outside the GCC region and the relevant conditions. However, you must consult with VAT consultants in Dubai before making key VAT decisions regarding the export of services. Read ahead to know further about VAT on the export of services outside the GCC area:

Application of VAT on services exported outside GCC countries 

As per the FTA, the VAT on services exported outside the GCC countries will be considered zero-rated. It means the supplier of the service is allowed to claim the input tax credits on the inputs used to provide the service. Moreover, no tax will be levied on the export of services. Tax agents in Dubai can help you assess the VAT on your exported services. However, you must meet certain conditions as per the UAE VAT regulations to leverage the zero-rating on the export of services outside the GCC area.

Conditions for VAT Treatment of services exported outside the GCC  

Two mandatory conditions must be met for the treatment of the export of services outside the GCC countries which are as follows:

  1. The recipient of the service should not have a place of residence in a GCC State and should be outside UAE at the time the services are rendered 

As per the UAE VAT regulations, the person who received the services should not be staying in the UAE at the time when the services were rendered. Additionally, the receiver must not have any place of residence or place of established or fixed establishment in the GCC states.

Consider this example: You have rendered services to a company’s head office, which is located outside the UAE. The place of residence of the entity will be the country in which the headquarter is located if it meets the following conditions:

  • The services rendered are related to the business activities
  • Any of the entity’s UAE branches are not involved in this transaction

However, the recipient will be qualified as outside the UAE if the person has a short-term presence of less than a month in the country or their presence is not connected to the relevant supply of services. In this case, the supply of services is eligible for a zero-rated VAT treatment.

  1. The rendered services must not have any relation or direct connection with real estate or moveable personal property 

The second condition states that the services provided to the entity outside the GCC must not be related to any real estate located in the UAE or any modification or development of real estate in the UAE. The exported services should also not be related to the real estate or personal moveable property in any manner. Both service providers and recipients must consider these conditions before carrying out the transaction.

Consult with the Best Tax Agents in Dubai, UAE 

To conclude, businesses must meet the two conditions laid out to enjoy the zero VAT rating on the export of services outside the GCC region. While filing VAT returns, businesses must carefully assess whether the VAT on the services rendered will be treated as zero-rated or not. Such an assessment is tough to perform without the assistance of the best VAT consultants in Dubai such as Jitendra Chartered Accountants (JCA).

JCA is one of the leading tax agents in Dubai registered with the FTA. We provide bespoke VAT consultancy services in Dubai to all kinds of businesses. Our FTA-approved tax agents are highly qualified and well-versed in the UAE Tax Laws. We understand that every business is different from the other. Hence, each of our services is tailored as per your specific business requirements.