VAT Application on Export of Services Outside GCC Countries
The concept of VAT was introduced in UAE on 1st January 2018 with the prime motive of providing a new source of revenue to the government. The standard rate of VAT has been 5% since its introduction for both goods and services. Under the VAT concept in UAE, services are referred to as anything that can be supplied other than the goods. When a service is rendered to an entity whose place of establishment or the fixed establishment is outside the UAE then it is considered the export of services. This article mainly focuses on making the readers understand the treatment of the export of services outside the GCC (Gulf Cooperation Council). The GCC comprises the states of UAE, Saudi Arabia, Kuwait, Qatar,Bahrain & Oman.
Read more: Possibilities to change the VAT return filing period in UAE
Application of VAT on services exported outside GCC countries
To be precise when the services are exported outside the GCC countries they will be treated as zero- rated under the regulations of VAT, which means the supplier of the service can claim the input tax credits on the inputs that were used to render the service and also no tax are charged on the export of services.
Two mandatory conditions must be met for the treatment of the export of services outside the GCC countries which are as follows:
1. The recipient or the beneficiary of the service must not have any place of residence in any of the GCC countries or states and the entity must be outside the UAE for the duration while the service is rendered. As the condition itself explains the receiver of the service must not stay in the UAE while the service is rendered and also, he or she must not have any place of residence or place of established or fixed establishment in the GCC states. Even if the recipient stays in the UAE for less than a month or if such presence is not related to the concerned supplies, then the recipient will be eligible for the treatment of zero rates of VAT services while the services are rendered.
E.g., Let's say service is provided to a firm's head office which is situated outside UAE if such services rendered are related to the business activities and don't involve a branch in UAE then the residence of the entity will be considered as the country in which the headquarter is situated.
2. The rendered services must not have any relation or direct connection with real-estate or
moveable personal property
The services rendered to the entity outside the GCC must not be connected with any of the real estates situated in UAE or the improvement or development of such real-estate in UAE. The services exported must also not be connected with any personal property that is moveable situated in UAE during the rendering of service outside the GCC countries. If the services rendered are related to the real estate or personal moveable property in any manner then the services won't be treated as zero-rated. These are the two conditions that must be kept in mind by the Taxpayer while providing the service and filing the returns. Both the service provider as well as the recipient must ensure that the
following conditions are followed or not.
Read more: VAT Impact on Banking Transactions in UAE
How can CDA help you?
The team of experts of CDA is always ready to provide its professional services to the clients who approach them. CDA is one of the top accounting firms in Dubai that always focuses on providing the best accounting and other financial services who need them. The firms can approach CDA for any kind of auditing and accounting needs along with other services like payroll management, filing of tax returns, tax consultation, etc. For more details and to clear any queries feel free to contact CDA.
