Exports of Goods and Services from the UAE VAT Zero Rated

The exports of goods and services is one of the mandatory categories subject to

zero-rating as per the dispositions of the Agreement.

The UAE has implemented the zero-rating of this category in Arts. 30 and 31 of the

Regulations, respectively, and subject to the conditions specified in these articles.

The first condition for zero-rating of exported goods is that the goods are physically

exported to a place outside the MEMBER STATES or put into a customs suspension

regime within 90 days of being supplied and that the supplier keeps or obtains

evidence that the goods have left the country. (Art. 30(1) of the Regulations).

The article makes a distinction between direct and indirect export, depending on

whether the transport is arranged by the supplier or by the recipient. This distinction

is relevant because the additional conditions to the two above that determine the

zero-rated treatment are different.

In addition to the conditions above, the following additional conditions apply to

indirect exports: (Art. 30(2) of the Regulations).

  • The overseas customer obtains evidence of export and provides it to the

             supplier

  • The goods are not used or altered between the time they were supplied and

             exported

  • The goods are not a possession of a crew member of a ship or aircraft when

              they leave the UAE.

The evidence to be provided consists of “official evidence” such as export

documents issued by Customs; and “commercial evidence” such as an invoice

with details of the recipient of the goods including where they are delivered and

transport documents evidencing the consignment of the goods to the final

destination. THE AUTHORITY can request alternative evidence. (Art. 30(4) of the

Regulations).

Under some exceptional circumstances beyond the control of the supplier and the

recipient, THE AUTHORITY has the power to extend the 90-day limit for export to

treat the supply as zero-rated. Where the supplier fails to export the goods within

90 days or the granted extended period, the supply will be treated according to its

VAT liability as if it was supplied in the UAE. (Art. 30(9) of the Regulations)

With regards to services, Art. 31 of the Regulations prescribes the conditions for

zero-rating as follows:

A.

  1. The services must be provided to a person who is non-resident in the GCC and

       is physically outside the UAE when the services are performed. A person is also

   treated as being outside the UAE if that person has a short-term presence in

   the UAE of less than a month and his presence is not connected with the

   supply. (Art. 31(2) of the Regulations).

  • The services are not supplied directly in connection with real estate situated in

             the UAE or any improvement to the real estate directly in connection with

            moveable personal assets situated in the State at the time the services are

            performed.

For example, the following two scenarios are not considered as “outside the State” for the purpose of the paragraph of Clause (1) of Article 31 of the Regulations:

  • When a person stays in the UAE for a month or more, regardless of whether his

             presence in the UAE is effectively connected with the supply or not.

  • When a person stays in the UAE for less than a month but his presence in the UAE is

            effectively connected with the supply.

B.

If the services are actually performed outside the Implementing States or are the

arranging of services that are actually performed outside the Implementing States.

C.

If the supply consists of the facilitation of outbound tour packages, for that part of

the service.

THE AUTHORITY has issued Public Clarification on “Zero-rating of export of services”

(VATP019) to explain the conditions of zero rating under Arts. 31(1) and 31 (2) of the

Regulations.

As outlined in Art. 31(3) of the Regulations, the zero-rating of the supply is

disallowed if, when a contract between the supplier and the overseas recipient

was entered into, it was foreseeable that the services would be effectively

received by another person, including but not limited to, an employee or a

director of the Non-Resident Recipient of Services in the UAE and they are not

used in making taxable supplies.

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