The UAE Federal Tax Authority (FTA) has published public clarification VATP019 on zero rating the export of services. The clarification was issued on 22 July 2020 following the amendment of cabinet decision no. 52 of 2017 on the executive regulation of federal decree-law no. 8 of 2017 on value added tax.
In accordance with the provisions of article 31(1)(a)(1) of the executive regulation, the export of services will be zero rated if the following conditions are met:
- the recipient of the services does not have a place of residence in an implementing state; and
- the recipient of the services is outside the United Arab Emirates at the time the services are performed.
The clarification provides FTA's views and interpretation on the two conditions set out below.
The recipient of the services does not have a place of residence in an implementing state
For the time being, the United Arab Emirates does not recognize any state of the Gulf Cooperation Council as an implementing state. Therefore, this condition would be satisfied if the recipient of the services does not have a place of residence in the United Arab Emirates. The place of residence in the UAE means either a "place of establishment" or a "fixed establishment".
The clarification further provides that if the recipient of the services has a number of establishments in different countries, the place of residence should be considered to be the country where the "place of establishment" or the "fixed establishment" is most closely related to the supply of services.
The recipient of the services is outside the United Arab Emirates at the time the services are performed
In accordance with the provisions of article 31 (2) of the executive regulation as amended, the recipient of the services will be considered as being "outside the United Arab Emirates" if it only has a short-term presence in the United Arab Emirates of less than 1 month and the presence is not effectively connected with the supply.
The clarification provides that only the physical presence of the recipient of the services during the periods in which the services are supplied and recipient enjoyed them should be taken into account. The place of presence of the recipient before or after the services were supplied should not be taken into account.