VAT Update: Navigating the New VAT Regulations: Impact on Zero-Rating Export Services
The Federal Tax Authority (FTA) has published Cabinet Decision No. (100) of 2024, which amends the Executive Regulations of Federal Decree-Law No. (8) of 2017(Executive Regulations), effective 15 November 2024.
This article highlights the changes to Article 31 of the Executive Regulations regarding the zero-rating of export services.
Key Amendments?
The key amendments to Article 31 – Zero rating the export of services are as follows:
- Additional Condition for Zero-Rating: Clause 1(a) now excludes services treated as performed within the State or a Designated Zone. This amendment means that services related to installation, transportation, restaurants, hotels, catering, culture, arts, sports, education, and real estate performed in the UAE will not qualify for zero-rating.
- Updated Criteria for “Outside the State”: The duration for anyone to be considered “outside the State” is updated from “less than one month” to “less than 30 days,” adding specificity:
It is essential to carefully evaluate the applicability of zero-rating relief when services are provided to a non-resident entity, and an employee, director, or any other representative of that non-resident entity is present in the UAE during the performance of the services for less than 30 days with a presence effectively connected to the service. In such cases, zero-rating relief may not apply.
Furthermore, the FTA adopts a strict approach: if the employee, director or any other representative’s presence exceeds 30 days, zero-rating relief will not apply, regardless of whether their presence is effectively connected to the service.
Next Steps
- Evaluate Zero-Rating Applicability: Pay attention to performance-based services mentioned in point 1 of this article, as well as cases where an employee, director, or other representative of the non-resident client may be present in the UAE. Their presence might affect the eligibility for zero-rating.
- Conduct a Comprehensive VAT Impact Assessment: Perform a high-level review of your business to identify areas where the updated VAT regulations could have a material impact.
- Implement Changes: Identify and implement any adjustments needed to comply with the new VAT regulations.
How can we help?
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With our team of tax and HR advisors, finance experts, and tax accountants, we can provide you with a bundle of services, ensuring the implementation is cost-effective.
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Re/think is an award-winning regional multi-service business advisory and outsourced services firm providing accounting, regulatory and compliance, tax and VAT advisory, audit, HR consultancy and recruitment services to regulated firms, multi- and single-family offices, and other operating businesses.
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