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VAT Application on Export Services Outside GCC
The United Arab Emirates (UAE) has a standard VAT rate of 5%, the lowest rate in the region. Nevertheless, entities must know the applications of various Value Added Tax (VAT) rates to particular circumstances like the export of services.
As per the VAT in UAE, services refer to anything supplied except goods. An export service is a service given to an individual with an establishment, fixed or otherwise, outside the UAE. On the other hand, GCC incorporates Qatar, Oman, Kuwait, Bahrain, Saudi Arabia, and the UAE States.
One must clearly understand the VAT rate on service exports beyond Gulf Cooperation Council (GCC) territory. In this case, you need to be aware of the definition of services concerning VAT. You must also know the first service VAT rate applied beyond the GCC region.
Broad knowledge of these significant aspects is essential to ensure compliance with the UAE VAT and avoid getting penalized by the Federal Tax Authority (FTA). This article provides details on how VAT is applied and the relevant conditions for services exports beyond the boundaries of the GCC region.
Choose UAE not only provide VAT Consultations to help your business avoid unnecessary fines and penalties, we also assist you in your VAT registrations.
How Is VAT Applied on Services Exported Outside GCC?
According to the FTA on VAT in the UAE, there will be a zero rating on services exported to countries beyond the GCC region. This implies that there is no taxation on export services. For this reason, service suppliers may insist on getting credit on input tax for the invested inputs in providing service exports.
Conditions for Export Services Outside GCC
Knowing the conditions can be helpful when trying to determine the VAT on your service exports. Nevertheless, to qualify for the zero-rated service exports outside GCC territories, there are specific conditions one must fulfill as outlined by VAT regulations in the UAE. The requirements are as outlined below:
1. Individuals receiving the service must not be a resident in any state of the GCC region. During the rendering of the service, they must be outside UAE.
In the provisions of the VAT regulation in the UAE, the one receiving the services must not reside in the UAE during the service rendering period. Moreover, the service recipient should not have a residential place or an establishment, fixed or otherwise, within the GCC region. In this case, the recipient is regarded as not being in the UAE if their presence was short-term (a month or less). Also, if their presence is not directly linked to the service supplied.
2. There should not be a direct link of the service with individual moveable property or real estate. The service rendered must not be related to the personal property of the individual receiving it.
Exported services beyond the GCC region from the UAE must not have a direct supply related to:
- Real estate established in the UAE or real estate’s development or modifications in UAE.
- Individual moveable property found in UAE during the performance of the services.
Therefore, there is a zero-rating of service exports outside the GCC region, similar to goods exports from the UAE. Nevertheless, the above conditions must be addressed to attain the zero-rating supply for service exports.
Service suppliers and recipients must consider the individual requirements before proceeding with any transaction. A more careful assessment of the VAT applications and conditions will save your business from penalties and fines.
How Choose UAE Can Help
It is best to consult with our VAT Consultants to assess and ensure that your export services rendered can be zero-rated. They are up-to-date and equipped with knowledge of the business industry and can provide the necessary information for setting up a business and more. We provide VAT consultation and registration for your business. Get in touch with our team today and schedule an appointment.
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