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VAT On Services Provided Outside UAE

Since VAT (Value Added Tax) was introduced in the UAE in 2018, most businesses have been charging a standard 5% on goods and services sold within the country. But what happens when your business provides services to clients who are outside the UAE? Do you still need to charge VAT?<br>Thatu2019s why understanding how VAT on services provided outside UAE works is really important for staying compliant and avoiding unnecessary taxes or fines.

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VAT On Services Provided Outside UAE

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  1. VAT ON VAT ON VAT ON SERVICES SERVICES SERVICES Provided Outside UAE Provided Outside UAE

  2. Since VAT (Value Added Tax) was introduced in the UAE in 2018, most businesses have been charging a standard 5% on goods and services sold within the country. But what happens when your business provides services to clients who are outside the UAE? Do you still need to charge VAT? The answer isn’t always straightforward. It depends on something called the “place of supply”, a key rule that helps determine whether your service is taxed in the UAE or not. In many cases, if you’re dealing with customers located outside the UAE, your services might be zero- rated (charged at 0% VAT) or completely outside the VAT scope, meaning no VAT applies. That’s why understanding how VAT on services provided outside UAE works is really important for staying compliant and avoiding unnecessary taxes or fines.

  3. WHAT IS VAT WHAT IS VAT WHAT IS VAT and How Does It Apply in the UAE? and How Does It Apply in the UAE? VAT stands for Value Added Tax, a consumption tax charged at each stage of the supply chain from production to sale. Although businesses collect and pay it to the government, the final cost is ultimately borne by the end consumer. VAT was introduced in the UAE on January 1, 2018, with a standard rate of 5% on most goods and services. However, certain supplies fall into special categories: However, certain supplies fall into special categories: Zero-rated (0%):Usually exports, international transport, and specific sectors like education and healthcare Exempt:Includes things like financial services, sale or lease of residential properties, bare land, and local passenger transport

  4. DOMESTIC VS DOMESTIC VS DOMESTIC VS INTERNATIONAL INTERNATIONAL INTERNATIONAL Supply of Services Supply of Services Domestic supplies (services within UAE boundaries) are taxed at 5%. International supplies, like services for clients outside the UAE, may be zero-rated or outside the scope of VAT, depending on the “place of supply” rules. For zero-rated international services, you won’t charge VAT, but you can still reclaim input VAT on related business costs.

  5. UNDERSTANDING UNDERSTANDING UNDERSTANDING PLACE OF SUPPLY PLACE OF SUPPLY PLACE OF SUPPLY for Services for Services The place of supply is the country where a service is considered to have been supplied for VAT purposes. This determines whether VAT should be charged, and at what rate. In the UAE, the default rule is based on the supplier’s location. Under Article 29 of Federal Decree-Law No. 8/2017, the place of supply for services is generally the supplier’s place of residence, meaning where your business is based.

  6. SPECIAL RULES: SPECIAL RULES: SPECIAL RULES: Article 30 Exceptions Article 30 Exceptions B2B services to a non‑UAE VAT‑registered business: Services related to goods (e.g., installation): Leasing transport to a non‑VAT lessee: Hotel, restaurant, catering: Cultural, artistic, sporting, and educational services: Real estate services: Transport services: Telecom and electronic services: If the place of supply is inside the UAE, you must charge VAT at 5%. If the place of supply is outside the UAE, the service is zero-rated or out-of-scope, and you don’t charge VAT. Applying the correct rule ensures you avoid unnecessary VAT charges, possible penalties, or missed claims.

  7. VAT ON SERVICES PROVIDED VAT ON SERVICES PROVIDED VAT ON SERVICES PROVIDED OUTSIDE UAE OUTSIDE UAE OUTSIDE UAE If your business provides services to clients outside the UAE, these services may fall into one of two categories: A. Zero-Rated Services B. Out-of-Scope Services Zero-rated services are those considered exports under UAE VAT law. According to Article 31 of the Executive Regulation: The service must be provided to a client whose place of residence is outside the UAE (or, alternatively, performed entirely outside the UAE), and It cannot involve real estate or movable property located in the UAE Out-of-scope services are never subject to VAT in the UAE, and they don’t feature on VAT returns. These include: Services provided by a business fully located outside the UAE to clients also outside the UAE Electronic services supplied overseas where both supplier and recipient are non-UAE entities

  8. When UAE Businesses When UAE Businesses DON’T CHARGE VAT DON’T CHARGE VAT DON’T CHARGE VAT You do not charge VAT in these situations: YOUR SERVICE IS ZERO-RATED: Provided to overseas clients. Or completely performed outside the UAE. And not tied to UAE property or assets. YOUR SERVICE IS OUT-OF-SCOPE: Your business and clients are both outside the UAE. Services are entirely beyond the UAE’s VAT jurisdiction.

  9. What are the Key Conditions for What are the Key Conditions for ZERO-RATING SERVICES ZERO-RATING SERVICES ZERO-RATING SERVICES To apply 0% VAT on services provided to clients outside the UAE, the following conditions must be met: 1. CLIENT MUST BE OUTSIDE THE UAE The client must not have a place of residence in the UAE—no head office or fixed establishment there.And not tied to UAE property or assets. 2. NO LINK TO UAE REAL ESTATE OR GOODS The service must not be directly connected to real estate or physical goods located in the UAE. 3. NO BUSINESS PRESENCE IN UAE The recipient should not have a branch, office, or other business setup in the UAE that is related to the service. 4. PROPER DOCUMENTATION REQUIRED

  10. SPECIAL CASES & SPECIAL CASES & SPECIAL CASES & EXCEPTIONS EXCEPTIONS EXCEPTIONS While many services provided to clients outside the UAE can be zero-rated, there are some exceptions where UAE VAT still applies, even if the customer is based overseas. 1. SERVICES RELATED TO UAE REAL ESTATE 1. SERVICES RELATED TO UAE REAL ESTATE 2. SERVICES CONNECTED TO EVENTS HELD IN 2. SERVICES CONNECTED TO EVENTS HELD IN THE UAE THE UAE 3. SERVICES RENDERED TO NON‑RESIDENTS 3. SERVICES RENDERED TO NON‑RESIDENTS BUT USED IN THE UAE BUT USED IN THE UAE

  11. NEED HELP WITH VAT NEED HELP WITH VAT Let Shuraa Tax Guide You Let Shuraa Tax Guide You To sum it up, if you’re offering services to clients outside the UAE, it’s important to understand how VAT works. Knowing when to apply 0% VAT, when it’s out of scope, or when standard VAT still applies can save you from costly mistakes. Make sure to review your service contracts, client details, and VAT setup regularly. And if it feels confusing, don’t worry, Shuraa Tax is here to help. Our VAT experts can guide you through the rules, help with proper documentation, and even handle your VAT returns. We make VAT easy, so you can focus on running your business.

  12. CONTACT US Phone +(971) 44081900 Email info@shuraatax.com Website shuraatax.com Location 601 Sheikh Zayed Road, 6th Floor, Aspin Commercial Tower – Dubai

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