VATP019

Issue

Article 31(1)(a)(1) of Cabinet Decision No. 52 of 2017 on the Executive Regulation of the Federal Decree-Law No. 8 of 2017 on Value Added Tax and its amendments (the "Executive Regulation") prescribes rules for the zero-rating of certain exports of services. This zero-rating rule is further supplemented by additional rules and conditions in Article 31(2) and (3) of the Executive Regulation.

This Public Clarification provides a high-level clarification of the FTA’s view of the zero-rating conditions in Article 31(1)(a) of the Executive Regulation relating to the residency and location of the recipient of services, taking into account the amendments made to Article 31(2) of the Executive Regulation in Cabinet Decision No. 46 of 2020.

Summary

In accordance with Article 31(1)(a)(1) of the Executive Regulation, a supply may only be zero-rated where the recipient of services does not have a place of residence in an Implementing State and is outside the UAE at the time the services are performed.

In determining whether these conditions are met, the supplier must consider all available facts in order to identify the residency status and the location of the recipient. Where the recipient has multiple establishments, the supplier must also determine which establishment of the recipient is most closely related to the supply.

Detailed Discussion

Article 31(1)(a) of the Executive Regulation allows the zero-rating of the export of services, subject to certain conditions. These conditions include the following condition in subsection (1) of Article 31(1)(a) of the Executive Regulation:

1. The Services are supplied to a Recipient of Services who does not have a Place of Residence in an Implementing State and who is outside the State at the time the Services are performed.

Subsection (1) of Article 31(1)(a) contains two requirements which must be met in order for a supply to be able to be zero-rated – firstly, the recipient of the services should not have a place of residence in an Implementing State, and secondly, the recipient of the services should be outside the UAE at the time the services are performed by the supplier. This Public Clarification provides the FTA’s views regarding the interpretation of these two conditions.

Condition 1: Place of Residence of the recipient

The first condition for zero-rating is that the recipient of services should not have a place of residence in an Implementing State.