Application of VAT on the export of Services outside GCC Countries

The concept of Value Added Tax (VAT) was implemented in the United Arab Emirates (UAE) on the 1st of January, 2018 with the aim of building a new source of revenue for the country. The rate for VAT has been decided at 5%. This VAT is applicable to both goods and services.

If a service is provided to a person or entity which is outside the United Arab Emirates then it is termed as the export of services. This article will help in the understanding of the treatment of the export of the services to countries that are outside the territories of the GCC.

VAT on Export of Services

The UAE has also decided not some rules for the application of Value Added Tax on export services outside the GCC countries. When the services will be exported to the countries outside UAE, then the services will be charged at zero (0) per cent. In simpler terms, 0% tax will be applicable on the export of the services out of the country and also the supplier of the service will be able to claim the input tax credit.

There are two conditions that need to be fulfilled to treat the services exported as a zero-rated service. These conditions are given below:

The recipient of the services should not have a place of residence in any GCC State and should be outside also during the duration this service is performed.

The recipient of the service should have a fixed establishment in any of the GCC states and should also be outside the promises of the United Arab Emirates at the service is performed. The recipient will be considered outside the country even if the presence is not connected to the supplies.

The exported services should not have any connection to real estate or any personal property which is movable.

The taxpayer should take into considerations that the service is not supplied in relation to real estate in the UAE or any personal property which is movable and is situated in the UAE during the services are performed.

These are the two conditions that should be taken care of in order to categorise a service that is exported to be zero-rated. Examples of both the points mentioned above have been provided below.

Example:

The services may be exported to a head office situated outside of the UAE, if the services provided relate to the business activities and do not involve any UAE branch then the head office then the residence will be considered as the country where the headquarter is located.
If the supply of the services is made to an overseas head office and all the services are used only for the purpose of the branch, then the place of residence will be considered in the UAE in turn this will lead to the service not being treated as zero-rated.

A services provider, as well as the recipient of a service, must take precautions that the above conditions are fulfilled before accepting the services as zero-rated. To understand more and in detail, the nuances of the VAT services, the management of a company must consult with professionals.

If you are looking for Vat related services for your company in the UAE then you must have a look at the services provided by JAXA Chartered Accountants.

How can JAXA Charted Accountants Assist you?

The professionals at JAXA Chartered Accountants will consider all the activities of the business and will provide the best possible service for your business. JAXA is one of the top ten Chartered accounting firms in the United Arab Emirates and aims to provide the best business solutions to the companies in the United Arab Emirates. The experts at JAXA are professionals and are well versed with the workings of the industry and will provide customized solutions for your company. To clarify any doubts regarding your business feel free to Contact Us. We will be happy to assist you in your business journey.