VAT on services to overseas clients
Exported services are zero-rated at 0%, not exempt. That single distinction decides whether you must register and whether you can reclaim the VAT on your own costs.
Services supplied to a customer outside the UAE are generally zero-rated, meaning VAT at 0% rather than 5%. They are not exempt and they are not outside the scope of VAT, and that distinction decides two things that matter commercially: whether you must register, and whether you can reclaim.
Zero-rated is not the same as exempt
An exempt supply carries no VAT and blocks recovery of the input VAT on costs incurred to make it. A zero-rated supply carries VAT at 0% and preserves full recovery. For a UAE business selling services to Australia, Europe or anywhere else outside the GCC implementing states, that difference is usually the whole economics of registering: you charge nothing to your customer and still reclaim the 5% you paid on your own software, rent, professional fees and equipment. Exporters are frequently in a permanent refund position for exactly this reason.
The second consequence surprises people. Zero-rated turnover still counts as taxable supplies for the registration threshold. A consultancy billing AED 900,000 a year entirely to overseas clients has exceeded the AED 375,000 mandatory threshold and must register, even though it will charge 0% on every invoice it issues.
The conditions that have to actually hold
Zero-rating is not automatic because the invoice is addressed abroad. The main test is that the recipient does not have a place of residence in a GCC implementing state and is outside the UAE when the service is performed. "Outside the UAE" is not defeated by a brief visit: a presence of less than a month, or a presence that is not effectively connected with the supply, does not spoil the treatment.
Zero-rating is not available where the service is supplied directly in connection with UAE real estate, or with moveable personal property situated in the UAE when the service is performed. There are further cases where services performed and enjoyed in the UAE fall outside the relief. And in every case the position has to be evidenced: contracts, the customer's address and status, and enough of a record to show the supply was genuinely made to someone abroad.
Where it goes wrong
- The customer has a UAE establishment. Invoicing the Australian parent while the work benefits its Dubai branch is the single most common failure, and it usually surfaces in an FTA query rather than at the time.
- The work concerns UAE property. Advising an Australian client on a Dubai building is connected with UAE real estate, and the customer's location does not rescue it.
- Nobody evidenced anything. The treatment may have been right and still fail, because the file cannot demonstrate it three years later.
- The threshold was missed. A business charging 0% on everything assumed it had no VAT obligations at all, and registered late with penalties, having also forfeited years of recoverable input VAT.
- Goods were treated like services. Exported goods have their own zero-rating rules and their own evidence requirements, including proof of export. The two regimes are not interchangeable.
What we do about it
For businesses with overseas customers we set the revenue coding up at the point of invoicing rather than reconstructing it at return time, so that zero-rated, standard-rated and out of scope revenue are separate lines in the ledger from the start. That makes each VAT return a report rather than a project, keeps the threshold visible while there is still time to act on it, and leaves an evidence trail that supports the treatment if it is ever questioned. See VAT services and bookkeeping.
It matters most for the businesses built on export revenue: consultancies and agencies, technology and SaaS, and Australian owned businesses serving customers back home.
Reviewed 24 September 2026 by Ahmed Nabil Selim. UAE tax rates, thresholds and deadlines change — confirm the position for your period before relying on it.
VAT on exported services — frequently asked questions
Generally no, because exported services are zero-rated at 0%, provided the conditions are met: the recipient has no place of residence in a GCC implementing state and is outside the UAE when the service is performed, the service is not connected with UAE real estate or with moveable property located in the UAE, and the position is evidenced. Zero-rated is not the same as exempt: you charge nothing, but you still recover input VAT on your costs, and the revenue still counts toward the AED 375,000 registration threshold.
Yes, once your taxable supplies exceed AED 375,000 in a rolling twelve month period or are expected to in the next thirty days. Zero-rated supplies are taxable supplies for this purpose, so an exporter charging 0% on every invoice can still be required to register. There is an exception worth knowing: a business making only zero-rated supplies may apply for an exception from registration, which removes the filing obligation but also removes the ability to reclaim input VAT. For most exporters with real UAE costs that is the wrong trade.
Usually not. The rule accommodates short visits: a presence in the UAE of less than a month, or a presence that is not effectively connected with the supply, does not defeat the treatment. What does defeat it is the customer having a place of establishment or fixed establishment in the UAE that the supply genuinely relates to. A founder flying in for a conference is not the problem. A customer with a Dubai branch that is the real beneficiary of the work is a different question, and it should be answered before the invoice is raised rather than after.
Enough to show who the customer was, where they were and what they received. In practice that means the contract or engagement letter naming an overseas counterparty, invoices carrying the customer's overseas address, evidence of the customer's status such as a foreign tax registration where available, correspondence showing where the work was delivered, and payment received from an overseas account. Where a customer has any UAE connection, a short file note recording why zero-rating was applied is worth far more three years later than a reconstruction from memory.
Invoicing clients abroad?
If you are charging 5% on exported services you are overcharging your customers, and if you are charging nothing without evidencing it you are carrying a risk. Both are worth resolving.
Have your VAT reviewed →