Is VAT charged on services to overseas clients? Zero-rating explained

The Ministry of Finance lists exports of goods and services to destinations outside the GCC among zero-rated supplies. The detailed conditions for services are in Article 31 of the VAT Executive Regulation. As commonly summarised, a service is zero-rated as an export when the recipient has no place of residence in an implementing state and is outside the UAE when the services are performed.

That gives two questions. Where does the customer belong? And where was the customer, or the individual receiving the benefit, when you did the work? An invoice addressed to a foreign company is not, on its own, enough.

Some services keep their 5% treatment even when the client is foreign, because of what they relate to.

• Services directly connected with real estate in the UAE, such as valuing or managing a Dubai property for an overseas owner.
• Hotel, restaurant and catering services performed in the UAE.
• Transport where the goods or passengers start their journey in the UAE, subject to the separate international transport rules.
• Telecommunications and electronic services used and enjoyed in the UAE.
• Services where the overseas company contracts but someone in the UAE actually receives the benefit.

A Dubai software studio builds an app for a company in Germany with no UAE presence. The German team works from Berlin, and acceptance testing is done remotely. Fee: AED 180,000. This is a typical zero-rated export, reported in Box 4 of the VAT 201.

A Sharjah consultancy advises a Saudi client on a restructuring. Two of the client's directors fly into Dubai for a three-day workshop that forms a large part of the engagement. Here the facts need care, because part of the service may be received by individuals physically present in the UAE. And an Abu Dhabi interior designer redesigning a villa on Saadiyat Island for an owner who lives in London charges 5%, because the service is directly connected with UAE real estate.

If the FTA reviews your zero-rated sales, you will need to show why each one qualifies. Keep the signed contract or statement of work, proof of the client's overseas residence such as a trade licence or registration certificate, records of where meetings and deliveries took place, and correspondence showing who received the benefit. Where the contracting party and the beneficiary are different group companies, keep the group structure too.

Put this evidence with the invoice, not in a separate folder. An auditor asking about Box 4 wants to click on an invoice and see the support.

In HelloBooks, each customer record can carry its country and a default VAT treatment, and each invoice line can override it. When you raise an invoice for an overseas client with zero-rating, the AI checks for contradictions: a UAE billing address, a UAE TRN on the customer record or a line description mentioning a UAE property. It asks for confirmation and reminds you to attach the evidence. The zero-rated total feeds Box 4 of the VAT 201 draft, which you or your accountant review before filing.

Firms with many overseas clients sometimes want a standard export evidence checklist on every invoice; we can configure that on request through hello@hellobooks.ai.