Tax & compliance
Zero-rated exports and services to overseas clients
Zero-rated and exempt are not the same thing, and the difference decides whether you can reclaim input VAT. Exporters get this wrong in the direction that costs them money.
The rule
What the law actually requires.
A zero-rated supply is taxable at 0%. An exempt supply is outside the tax altogether. The distinction is not cosmetic: a business making zero-rated supplies charges no VAT to the customer but retains the right to recover input VAT on its costs, whereas a business making exempt supplies charges no VAT and cannot recover input VAT. Exports of goods outside the UAE are zero-rated subject to evidential conditions. Certain services supplied to recipients outside the UAE are also zero-rated, subject to conditions that are narrower than exporters assume.
Those conditions on services are where the exposure sits. The zero rating for exported services generally requires that the recipient has no place of residence in the UAE and is outside the UAE at the time the services are performed, and it does not apply where the services are supplied directly in connection with real estate or goods situated in the UAE, or where the actual benefit is enjoyed here. A consultancy that invoices an overseas parent for work performed on a UAE project is not exporting a service. The invoice address does not decide it; where the benefit lands does.
Thresholds and deadlines
- Zero-rated
- Taxable at 0% — input VAT remains recoverable
- Exempt
- Outside the tax — input VAT is not recoverable
- Exports of goods
- Zero-rated subject to export evidence
- Exported services
- Zero-rated only where the conditions are met
- Blocked
- Services connected with UAE real estate or goods, or enjoyed here
- Evidence
- Customs documentation and commercial evidence of export
The compliance calendar
What to do
The filing, step by step.
- Establish whether you are zero-rated or exemptThey look identical on an invoice and differ entirely in input recovery.
- For goods, retain the export evidenceCustoms declarations and shipping documentation. Without them the supply is standard-rated on audit.
- For services, test the conditions properlyRecipient's residence, location at the time of performance, and where the benefit is actually enjoyed.
- Do not rely on the invoice addressBilling an overseas entity for work benefiting a UAE project does not make it an export.
- Keep zero-rated supplies in the threshold calculationThey count towards the registration threshold even though no VAT is charged.
Related
Questions
Zero-rated supplies are taxable at 0% and input VAT remains recoverable. Exempt supplies are outside the tax and input VAT cannot be recovered.
Only where the conditions are met — the recipient outside the UAE, no UAE residence, and the benefit not enjoyed here. It is narrower than most exporters assume.
Yes. They are taxable supplies at 0%, so they count. Exempt supplies do not.
Customs documentation and commercial evidence that the goods left the UAE. Without it the supply is treated as standard-rated.
One question
Where are you with VAT?
The test is rolling rather than annual, which is why the obligation usually arises mid-year rather than at a year end. Above AED 375,000 of taxable supplies over any twelve months it is mandatory, and the thirty-day forward test can trigger it before you have invoiced anything.
The thresholds explainedOr just ask usThen the exposure is almost certainly input VAT rather than output. Claims without a valid tax invoice, entertainment, and personal-use vehicles are the three findings that come up on nearly every review, and the adjustment carries a penalty.
What gets disallowedOr just ask usDisclose it rather than hoping. The penalty on a voluntary disclosure is materially lower than on an error the FTA finds, and audits that uncover undisclosed errors tend to widen rather than close.
Voluntary disclosureOr just ask us