If you sell a service to a client outside the UAE, or buy one from a supplier abroad, the first VAT question is not “what is the rate?”. It is “where is this service treated as supplied?”. The answer decides whether you charge 5% UAE VAT, charge 0%, or account for the tax yourself on a purchase.
This guide is written for VAT-registered UAE businesses, freelancers and consultants who work across borders. It follows Federal Decree-Law No. 8 of 2017 on Value Added Tax and its Executive Regulation, Cabinet Decision No. 52 of 2017, as amended. Every article number below was checked against the FTA’s published texts.
Published: 22 October 2026
Quick Answer
Under Article 29 of Federal Decree-Law No. 8 of 2017, the place of supply of a service is the supplier’s place of residence. Article 30 then lists the exceptions: a recipient registered for VAT in another GCC implementing state, a business recipient in the UAE buying from a foreign supplier, services linked to goods, hotels and restaurants, events and education, real estate and transport. Telecommunications and electronic services follow where they are used and enjoyed (Article 31). If the place of supply is inside the UAE, UAE VAT applies, either at 5%, or at 0% if the export of services conditions in Article 31 of the Executive Regulation are met.
Why Place of Supply Comes First
UAE VAT only applies to supplies made in the UAE. So before you look at the rate, the invoice or the return, you must establish where the supply takes place. Three outcomes are possible:
- The place of supply is in the UAE and the supplier is in the UAE. UAE VAT applies, at 5% or at 0% if the supply qualifies as a zero-rated export of services.
- The place of supply is in the UAE but the supplier is abroad. The UAE business customer accounts for the tax itself under the reverse charge mechanism (Article 48 of the Decree-Law). We cover that mechanism in our guide to the UAE reverse charge mechanism.
- The place of supply is outside the UAE. No UAE VAT is charged on that supply. In the special GCC case, the tax is dealt with in the other state.
Getting this wrong has real cost. Charging 5% on a service that is a zero-rated export makes you uncompetitive. Charging 0% on a service that is actually supplied in the UAE leaves you with unpaid output tax, and exposure to penalties. If you are not sure whether you are registered at all, start with our guide on whether you need to register for VAT in the UAE. If your cross-border service business hires staff in the UAE, Yalah Dubai explains how MOHRE company classification affects work permit costs.
Step 1: The General Rule (Article 29)
Article 29 of the Decree-Law is one sentence: the place of supply of services is the place of residence of the supplier.
So a Dubai consulting company advising a client in London starts from the position that its supply is made in the UAE. A London design agency working for a Dubai company starts from the position that its supply is made in the UK. The exceptions in Article 30 then change that starting point for specific cases.
What “place of residence” means (Article 32)
Place of residence is not about where the person lives or where the work is done. Article 32 sets three tests, in order:
| Situation | Place of residence |
|---|---|
| The person has a place of establishment or fixed establishment in only one state | That state |
| The person has establishments in more than one state | The state where the establishment most closely related to the supply is located |
| The person has no establishment anywhere | The state of the person’s usual place of residence |
Two practical points follow. A freelancer or one-person company with a UAE licence and office is resident in the UAE for this purpose. A company with a UAE head office and a branch abroad must ask which establishment is most closely related to the particular supply, which depends on who actually carries out the work and who contracts it.
Step 2: The Special Cases (Article 30)
Article 30 says that, as an exception to Article 29, the following rules apply. They are the part of the law that most often changes the answer.
| Case | Article 30 clause | Place of supply |
|---|---|---|
| Recipient has a place of residence in another GCC implementing state and is registered for VAT there | 1 | The recipient’s place of residence |
| Recipient is in business and resident in the UAE, and the supplier has no place of residence in the UAE | 2 | The UAE |
| Services related to goods, such as installation of goods supplied by others | 3 | Where the services were performed |
| Leasing of means of transport to a lessee who is not a taxable person in the UAE and has no tax registration number in an implementing state | 4 | Where the means of transport was put at the lessee’s disposal |
| Restaurant, hotel and catering services | 5 | Where the services are actually performed |
| Cultural, artistic, sporting, educational or similar services | 6 | Where the services were performed |
| Services related to real estate | 7 | Where the real estate is located |
| Transportation services | 8 | Where the transportation starts |
An “implementing state” is a GCC state that has introduced VAT. Check the current list before relying on the GCC rule for a specific client.
Clause 1: business customers in other GCC states
If your customer is in another implementing state and is registered for VAT there, the place of supply is that state, not the UAE. You do not charge UAE VAT. The customer deals with the tax under the rules of its own state. Keep the customer’s tax registration number on file, because it is the fact that moves the supply out of the UAE.
Clause 2: services bought from abroad
If you are a business resident in the UAE and your supplier has no place of residence in the UAE, the place of supply is the UAE. This is the rule behind imported services. If you are VAT registered, you account for UAE VAT on the purchase yourself, and normally recover it as input tax in the same return if you make taxable supplies.
Clause 3: services related to goods
Repair, testing, installation or processing of goods supplied by others is taxed where the work is performed. A UAE workshop repairing a machine that is in the UAE makes a UAE supply even if the owner is a foreign company. A UAE engineer who repairs a machine in Oman is performing the work outside the UAE.
Clauses 5 and 6: hotels, restaurants, events and education
These follow the physical location. A conference, a training course or a sports event delivered in Dubai is a UAE supply, whoever buys the ticket. The same service delivered abroad is not.
Clause 7: real estate
Article 21 of the Executive Regulation explains what counts. A service is related to real estate if it is directly connected with it, or grants a right to use it. The list includes granting or assigning an interest in real estate, hotel accommodation, services by real estate experts and estate agents, and construction, maintenance and similar work. Such a service is taxed where the property is located. Our guide to VAT on real estate in the UAE covers the sale and lease rules in full.
Clause 8: transport
The place of supply of a transportation service is where the transportation starts. Article 22 of the Executive Regulation applies the same place to services related to that transport. For a trip with more than one stop that consists of multiple supplies, each supply is treated separately by where it starts.
Telecommunications and Electronic Services (Article 31)
These services are not tested by the supplier’s residence. Article 31 of the Decree-Law says the place of supply is inside the UAE to the extent of use and enjoyment of the service in the UAE, and outside the UAE to the extent of use and enjoyment outside it. It adds that actual use and enjoyment is where the service is used, regardless of where the contract is made or the payment is received.
Article 23 of the Executive Regulation defines the services. Electronic services are services delivered automatically over the internet or an electronic network. The list includes:
- domain names, web hosting and remote maintenance of programs;
- supply and updating of software;
- digital images, text, e-books and similar files;
- music, films and games on demand;
- advertising space on a website;
- live streaming and distance learning.
If you sell software, a platform subscription or digital content, ask where the customer uses it, not where your company sits. If you sell through a website, also read our guide on e-commerce tax in the UAE.
Designated Zones
Article 51 of the Executive Regulation contains a separate rule for designated zones. Clause 6 says the place of supply of any services is inside the UAE if the place of supply is in a designated zone. So a designated zone is not a way out of UAE VAT for a service supplied there. Clause 7 gives a narrow exception for shipping and delivery services linked to goods that have a place of supply outside the UAE. See our complete list of VAT designated zones before assuming a free zone location changes the VAT treatment.
When a UAE Supply Becomes Zero-Rated: Export of Services
Once you know the place of supply is the UAE, the question becomes whether you charge 5% or 0%. Article 31 of the Executive Regulation (zero-rating the export of services) has two main routes.
Route 1, the recipient test. The service is zero-rated if both of these are true:
- The recipient does not have a place of residence in an implementing state and is outside the UAE when the service is performed.
- The service is not supplied directly in connection with real estate in the UAE, or with movable personal assets in the UAE at the time of performance.
Route 2, the performance test. The service is zero-rated if it is actually performed outside the implementing states, or is the arranging of such services.
There is also a rule for outbound tour packages, for that part of the service.
Two further clauses matter for contract design:
- Short-term presence. Under clause 2, a person is treated as “outside the State” if they have only a short-term presence in the UAE of less than a month, and that presence is not effectively connected with the supply. This clause was amended by Cabinet Decision No. 46 of 2020.
- Anti-avoidance. Under clause 3, the zero rate is denied where a non-resident recipient contracts for services that will be received in the UAE by another person, such as an employee or director of that recipient, and it is reasonably foreseeable that this person will receive them while making supplies on which input tax cannot be fully recovered.
For goods rather than services, see our guide to VAT on exports and the zero-rating rules.
Worked Examples
These examples are illustrative. They apply the rules above to simple facts. Real contracts need a check of their own facts.
| Scenario | Place of supply | VAT result |
|---|---|---|
| UAE marketing agency (VAT registered) designs a campaign for a US company with no UAE presence. The US company is outside the UAE | UAE (Article 29), but export conditions met | Zero-rated under Article 31 of the Executive Regulation, if evidence is kept |
| UAE accountant advises a company in Riyadh that is VAT registered in Saudi Arabia | Saudi Arabia (Article 30, clause 1) | No UAE VAT, customer handles tax in Saudi Arabia |
| UAE company buys software development from an Indian firm that has no UAE establishment | UAE (Article 30, clause 2) | UAE company accounts for 5% under the reverse charge, then recovers it if entitled |
| UAE workshop repairs a machine located in Sharjah for a German owner | Where performed, the UAE (Article 30, clause 3) | Standard 5%, because the service is connected with goods in the UAE |
| Dubai hotel hosts a corporate event for a UK company | Where performed, the UAE (Article 30, clauses 5 and 6) | Standard 5% |
| UAE freelancer, VAT registered, edits a video for an Australian client who is outside the UAE | UAE (Article 29), export conditions met | Zero-rated, if the client has no residence in an implementing state |
Evidence and Records
The Decree-Law does not leave export treatment to trust. Article 78 requires a taxable person to keep records of exported goods and services, together with all tax invoices and credit notes issued and received, and records of imports and supplies. If you zero-rate a service, the FTA can ask you to show why. The law does not publish a single mandatory checklist for services, so the following is good practice that supports each condition in Article 31:
- A written contract or engagement letter naming the customer, the service and the country.
- Proof of where the customer is established, such as a trade licence, certificate of incorporation or tax registration certificate.
- The customer’s tax registration number where the GCC rule in Article 30, clause 1 is relied on.
- Evidence that the service is not tied to UAE property or assets, for example a short scope statement.
- A proper tax invoice showing the correct treatment. Our guide to tax invoice and credit note requirements lists the required fields.
- Proof of payment from the customer, which helps show the supply is real and who the recipient is.
Keep these records with each invoice. If the FTA reviews a return, the record should explain the place of supply without anyone having to reconstruct it from emails. If you realise a past return treated a service wrongly, read our guide to voluntary disclosure before the FTA raises it first.
Common Mistakes
- Using the invoice currency or payment location as the test. Neither decides the place of supply. Residence and the Article 30 cases do.
- Assuming every foreign customer means zero-rating. The recipient must be outside the UAE and not resident in an implementing state, and the service must not be connected with UAE real estate or movable assets.
- Ignoring the GCC rule. A customer registered for VAT in another implementing state changes the place of supply, rather than the rate.
- Forgetting the reverse charge on purchases. Services bought from abroad that have a UAE place of supply must be self-accounted for.
- Treating a free zone company as outside UAE VAT. A designated zone is treated as inside the UAE for services.
- Mixing services that have different rules. A bundle of consulting, hosting and an on-site event may contain different places of supply. Split the invoice lines where the rules differ.
- Keeping no evidence. A zero rate with no records is the first thing a reviewer questions.
Frequently Asked Questions
What is the general rule for place of supply of services in the UAE?
The place of supply of services is the supplier’s place of residence, under Article 29 of Federal Decree-Law No. 8 of 2017. Article 30 and Article 31 then set exceptions.
How is a supplier’s place of residence decided?
Under Article 32, it is the state where the person has its place of establishment or fixed establishment. If there are several, it is the one most closely related to the supply. If there is none, it is the person’s usual place of residence.
Do I charge UAE VAT on services to a customer outside the UAE?
Not always at 5%. If the place of supply is the UAE, the supply may be zero-rated as an export of services if the recipient has no place of residence in an implementing state, is outside the UAE when the service is performed, and the service is not connected with UAE real estate or movable assets.
What if my customer is in another GCC country?
If the customer has a place of residence in another implementing state and is registered for VAT there, Article 30, clause 1 makes that state the place of supply. You do not charge UAE VAT.
What happens when I buy a service from a foreign supplier?
If you are a business resident in the UAE and the supplier has no UAE residence, the place of supply is the UAE under Article 30, clause 2. A VAT-registered buyer accounts for the tax under the reverse charge in Article 48 of the Decree-Law.
Where are software and digital services taxed?
Where they are used and enjoyed, under Article 31 of the Decree-Law and Article 23 of the Executive Regulation. The place of the contract or of payment does not matter.
Does a free zone company get a different rule for services?
Article 51 of the Executive Regulation treats the place of supply of services in a designated zone as inside the UAE. Whether a particular free zone is a designated zone must be checked against the Cabinet list.
Where is the place of supply of services linked to property?
Where the real estate is located (Article 30, clause 7 and Article 21 of the Executive Regulation). Construction, maintenance, estate agency and hotel accommodation are examples of services connected with real estate.
What records do I need for zero-rated services?
Article 78 requires records of exported goods and services, tax invoices and credit notes. Keep the contract, proof of the customer’s location, the invoice and payment evidence together. Check anything unusual against the FTA’s current guidance.
Can a short visit to the UAE change the result?
Under Article 31, clause 2 of the Executive Regulation, a recipient with a short-term presence in the UAE of less than a month, not effectively connected with the supply, is still treated as outside the UAE. The anti-avoidance rule in clause 3 can still deny the zero rate in specific cases.
Related Reading
- MOHRE Company Classification 2026 (Yalah Dubai)
- UAE reverse charge mechanism 2026
- VAT on exports and the 90-day rule
- Tax invoice and credit note requirements
- E-commerce tax in the UAE
- VAT designated zones, complete list
- UAE VAT registration guide
- Common VAT mistakes in the UAE
Need Help With Cross-Border VAT?
If you invoice clients abroad or buy services from foreign suppliers and want the place of supply checked before your next return, message Qaspro Global on WhatsApp: https://wa.me/971551539679.
Sources: Federal Decree-Law No. 8 of 2017 on Value Added Tax (Articles 29 to 32, 48 and 78) and Cabinet Decision No. 52 of 2017 and its amendments (Articles 21, 22, 23, 31 and 51), as published by the Federal Tax Authority at tax.gov.ae. This article is general information, not tax advice for your specific facts.
Founder & CEO, Qaspro Global — UAE tax expert with 16+ years of experience in VAT, corporate tax and FTA audit support.
