UAE Zero-Rated VAT (0%) for Exports: A Field Guide for EU & US Companies

20.01.2026

Who Should Read This

This guide is for EU and US businesses that buy or sell through the UAE and need a clear path to applying the zero-rated (0%) VAT for exports. It’s written for founders, finance leads, and operations teams who want practical steps, not theory.

Common scenarios

  • EU/US seller buying in the UAE and shipping abroad — direct export, drop-ship from UAE stock, or cross-dock with minimal storage.
  • Services supplied from the UAE to non-UAE customers — consulting, IT, marketing, support delivered to clients outside the UAE.
  • Intercompany flows — HQ ↔ UAE subsidiary, distributors/resellers, and situations where third-party payers settle invoices on a customer’s behalf.

UAE VAT at a Glance — What’s Different from EU VAT & US Sales/Use Tax

The UAE has a federal VAT system with a standard rate and a zero-rate for qualifying exports. Many concepts look familiar to EU readers, but there are key differences in scope, documentation, and deadlines. For US readers, think of VAT as a tax on value added at each stage (not a retail sales tax).

Registration & scope

  • TRN (Tax Registration Number). You must register and obtain a TRN when you meet the mandatory threshold (currently AED 375,000 of taxable supplies in a 12-month period).
  • Voluntary registration is possible at AED 187,500 of taxable supplies/expenses (useful if you want to recover input VAT).
  • De-registration can be requested if you cease making taxable supplies or only make zero-rated supplies and meet the Federal Tax Authority (FTA) conditions.
  • Group registration may be available for related entities; assess if a VAT group simplifies intercompany billing and evidence.

Rate structure & returns

  • Rates. Standard VAT rate is 5%; 0% applies to qualifying exports of goods and certain services. Some supplies may be exempt (outside scope of this guide).
  • Return cadence. Returns are filed monthly or quarterly as assigned by the FTA; pay any VAT due by the return deadline.
  • Input VAT recovery. You may recover input VAT linked to taxable (including zero-rated) activities, subject to normal rules and separate tracking for mixed activities.
  • Record retention. Keep VAT records and supporting evidence for at least 5 years (longer for real-estate-related activities).

Concept crosswalk

  • EU "place of supply" vs UAE rules. Both systems test where a supply is considered made, but the UAE’s zero-rating tests for goods (proof of export) and services (customer outside the UAE and effective use outside the UAE, with exceptions) are applied under UAE law and FTA guidance.
  • US sales/use tax vs UAE VAT. The US has no federal VAT. UAE VAT is applied throughout the supply chain with input-tax recovery; compliance hinges on invoicing standards, evidence of export, and timely returns, not only on point-of-sale rules.
  • Designated zones. Unlike many EU concepts, the UAE recognizes designated zones for goods with special handling; these zones generally do not change the VAT treatment of services.
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Zero-Rating for Goods — When It Applies

Direct vs Indirect Export

  • Direct export. You ship goods from the UAE to a customer outside the UAE. Your company is usually the Exporter of Record (EOR); the foreign buyer (or its broker) is the Importer of Record (IOR).
  • Indirect export. A foreign buyer takes possession in the UAE and then exports the goods. Zero-rating can still apply if strict conditions are met (export within the allowed time, full evidence that the same goods left the UAE, and no use in the UAE).
  • Incoterms® and risk/title. Your chosen term (e.g., FCA, FOB, CIF, DAP) affects who controls carriage, risk transfer, and who can obtain which documents. Align the contract so the party responsible for export can actually collect the required proofs (transport papers, exit evidence, delivery confirmations).

Time limits & extensions

  • Export and evidence window. Goods must physically leave the UAE and be evidenced within the timelines set by the Federal Tax Authority (FTA).
  • Operational control. Track the shipment from pick-up to exit and receipt abroad; set internal cut-offs (e.g., T+15 for draft docs, T+30 for final set).
  • Extensions. If delays arise (late bill of lading, rolled shipment, force majeure), file an extension request with reasons and interim proofs (carrier letters, terminal notices, booking confirmations).

Evidence bundle (must match end-to-end)

  • Commercial documents. Tax Invoice with your TRN, matching packing list (quantities, weights, marks).
  • Transport documents. AWB (air): origin/destination airports, dates, consignee. B/L (sea): on-board notation, vessel/voyage, load/ discharge ports. CMR (road): shipper/consignee, places of loading/unloading, route.
  • Customs exit proof. Evidence that the shipment left the UAE (customs messages, exit notes, port/airport confirmations).
  • Delivery evidence (if applicable). Proof of receipt abroad: arrival notices, POD, warehouse intake.
  • Proof of funds. Bank receipts or statements showing consideration paid.
  • Match test. Parties, descriptions, HS codes (where used), quantities, dates, and routes must align across all documents.

High-risk patterns for EU/US traders

  • Triangulation/chain deals. Two or more resales around one physical movement—map EOR/IOR clearly and keep contracts consistent with the route.
  • Drop-ship from UAE stock. Make sure the stock movement and the sale contract point to export (not local supply).
  • Mid-route re-routing. If the destination changes, update the evidence trail (amended B/L, carrier letters, revised invoices).
  • Intercompany re-charges. Keep intercompany agreements, pricing memos, and delivery evidence aligned; mismatches can defeat zero-rating.

Zero-Rating for Services — What Works and What Doesn’t

B2B outside the UAE: tests you must meet

  • Customer establishment outside the UAE. The contracting customer is not established in the UAE for this supply.
  • Effective use and enjoyment outside the UAE. The service is designed for, and actually used, outside the UAE.
  • No on-the-ground performance that flips the rate. If material parts are performed in the UAE (e.g., on-site work), the standard rate may apply to that portion.

Services typically not zero-rated

  • Real estate in the UAE. Valuation, leasing, management tied to UAE property.
  • In-country events and trainings. Conferences, seminars, exhibitions taking place in the UAE.
  • Catering and similar in-country services. Any service physically delivered at UAE locations.
  • Other in-UAE performance. Where the place of performance or consumption is inside the UAE.

Evidence pack for services

  • Contract scope stating offshore use (where outcomes are delivered/used).
  • Deliverables and acceptance docs (reports, hand-offs, sign-offs) showing use outside the UAE.
  • Work logs (time sheets, project plans, ticketing exports) tying team activity to offshore consumption.
  • Correspondence (SOW amendments, customer confirmations).
  • Payment evidence matching the Tax Invoice and contract.

Mixed supplies & apportionment

  • Split the scope. Price and invoice the UAE-performed portion separately from the offshore portion.
  • Apportion input VAT. Track costs against each portion; recover only what relates to taxable/zero-rated activity.
  • Document the basis. Keep a clear memo explaining the split (tasks, locations, hours, milestones) and mirror it in invoices and acceptance acts.

Designated Zones (DZ) — Benefits & Boundaries

When goods movements in/out of DZ qualify for 0%

  • Closed-loop warehouse controls. Keep access logs, CCTV, and gate-in/gate-out records. Tie every movement to a stock ID, shipment number, and customer order.
  • Stock segregation. Physically and in the system, separate DZ stock from mainland and export-bound stock; no commingling.
  • Proof of exit. Retain customs exit messages, carrier confirmations, and transport documents (AWB/B/L/CMR) that show the goods left the DZ to a foreign destination or another DZ under permitted rules.
  • No in-UAE use. Goods must not be used or consumed in the UAE before exit; any local use breaks zero-rating.

Why DZ rarely helps services

  • DZ rules are designed for goods. Most services are taxed at the standard rate even if supplied in a DZ.
  • Only rely on DZ treatment when dealing with movements of goods; assess services under the normal "place of supply" and zero-rating tests.

Mainland transfers

  • Tax point. When goods move from a DZ to the mainland, a taxable supply generally occurs at that point.
  • Who accounts for VAT. Typically the importer (or the mainland recipient) accounts for VAT; ensure contracts clearly allocate responsibility.
  • Documentation. Maintain the import entry, delivery notes, and the tax invoice reflecting the mainland supply. Reconcile quantities between DZ stock-out and mainland stock-in.
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Contracts & Operations — Build Zero-Rating into Your Process

Contract clauses to include

  • Export evidence responsibility. Name the party that must collect and share transport papers, customs exit proof, and delivery confirmations; set timelines and formats.
  • Third-party payer wording. Allow payments from group entities or customers' affiliates, with clear references to the original contract and invoice numbers.
  • EOR/IOR allocation. State who is Exporter/Importer of Record and who engages brokers and carriers.
  • Incoterms alignment. Choose terms consistent with your evidence plan (e.g., FCA if you need the buyer to arrange export; CIF/DAP if you control carriage).
  • Audit cooperation. Oblige the counterparty to provide copies, confirmations, and attestations on request.

Operational checklists

  • Pre-transaction KYC. Verify the customer’s establishment outside the UAE (for services) and the consignee details (for goods).
  • Data points that must match. Parties, descriptions, HS codes (if used), quantities, serials/marks, route, dates, and consideration must align across contract, invoice, packing list, transport docs, customs records, and bank receipts.
  • Escalation path. If evidence is delayed (rolled shipment, missing B/L), trigger an internal timer: notify the counterparty, obtain interim proofs, and—if needed—prepare an extension request to the FTA.
  • Cut-offs. Set internal deadlines (e.g., drafts in 7–10 days, finals in 30 days) to avoid last-minute scrambles.

Document hygiene

  • Version control. Number contracts, SOWs, and invoices; keep a single source of truth.
  • Certified copies. Where originals are not available, obtain certified copies from carriers, terminals, or brokers.
  • Corrections. Use credit/debit notes for pricing/quantity changes; for transport docs, request formal amendments from the carrier—no handwritten edits.
  • Currencies. For FX / two-currency invoices, show VAT treatment clearly and keep the exchange rate source and date on file.
  • Archiving. Keep a searchable archive for at least the statutory retention period; index by shipment number and customer so an auditor can reconstruct the trail in minutes.

Compliance & Refunds

VAT returns: where zero-rated lines sit, common reconciliations

Return layout. Report zero-rated outward supplies in the dedicated boxes of the UAE VAT return; do not net them off against input VAT.

Reconciliations to run each period:
  • Invoice → return: Sum of zero-rated Tax Invoices matches the figure in the return.
  • Logistics → invoices: Quantities and values on AWB/B/L/CMR and packing lists agree with invoiced goods.
  • Customs exit → shipments: Exit confirmations exist for each export line.
  • Bank → invoices: Receipts tie to customers and invoice numbers; third-party payments have supporting letters/agreements.
  • VAT ledger → GL: Zero-rated sales and input VAT postings reconcile to the general ledger and management accounts.

Input VAT on zero-rated activity

Separate tracking. Tag costs as direct to zero-rated sales, direct to standard-rated sales, or overheads (apportion overheads by a reasonable method).

Refund or carry-forward?
  • Refund is realistic when input VAT regularly exceeds output VAT (e.g., exporters with large freight/warehouse costs).
  • Carry-forward may be simpler if the amount is small or you expect near-term output VAT to offset it.
Evidence for recovery: Valid Tax Invoices from suppliers, proof of payment (if requested), and a memo explaining your apportionment method.

Record-keeping & e-invoicing status

  • FTA expectations. Keep a complete evidence pack for each export: contract/SOW, Tax Invoice, packing list, AWB/B/L/CMR, customs exit proof, delivery confirmation (if applicable), bank receipts.
  • Retention. Maintain records for at least 5 years (longer for real estate). Ensure records are retrievable within days.
  • Electronic formats. Scanned copies and system exports are acceptable if they are legible, complete, and can be authenticated. Keep version control and an index (by shipment number/customer).

Red Flags & How to Fix Them

Route/consignee/date mismatches across AWB/B/L/CMR vs invoice

Risk. Auditors disallow zero-rating when transport docs don’t align with the Tax Invoice/contract.

Fix. Obtain amended transport documents from the carrier, issue a corrected packing list/invoice if needed, and add a short reconciliation note mapping old to new data. File all versions.

Third-party payments without a paper trail (assignments/novation)

Risk. Payment from a different entity breaks the "contract → invoice → funds" chain.

Fix. Add a third-party payer clause or sign an assignment/novation letter referencing the contract and invoice numbers. Keep the payer’s details and a tri-party confirmation of settlement.

Late export evidence — extension request package that works

Risk. Missing exit proof within the FTA timeline can force standard-rate treatment.

Fix (package):
  • Cover letter explaining the delay (e.g., rolled vessel, late B/L).
  • Interim proofs (carrier/terminal letters, booking confirmations).
  • Copies of contract, Tax Invoice, packing list, and current transport docs.
  • Target date for final documents and contact responsible. Submit early—before the deadline expires.

Misjudging "place of supply" for services (real estate/events pitfalls)

Risk. Treating services as zero-rated while they are performed or consumed in the UAE (e.g., property-related services, in-country events, on-site work).

Fix. Split the scope into offshore and in-UAE parts with separate pricing and invoices. Update the contract to state where each part is performed and how deliverables are used; keep acceptance docs that show offshore consumption.

Special Cases

Multimodal shipments — building one coherent proof pack

  • Plan the chain. Map each leg (air/sea/road/rail), who contracts it, and which document proves it.
  • Link the legs. Use one shipment ID across the Tax Invoice, packing list, AWB/B/L/CMR, and broker references.
  • Continuity evidence. Add handover notes between carriers, terminal gate-in/gate-out logs, and route confirmations.
  • Amendments. If a leg changes (rolled vessel, re-route), obtain amended transport papers and attach a short reconciliation note.
  • Final stitch. Keep a one-page cover sheet listing all docs in sequence so an auditor can follow the movement end-to-end.

Intercompany & transfer pricing — VAT consequences

  • Substance first. Make sure the UAE entity has real people, office, and decision records consistent with its role in the chain.
  • Contracts match reality. Intercompany agreements must reflect who sells, who performs, and where.
  • Pricing memo. Keep a brief method note (how you priced the charge) and tie it to deliverables and time sheets.
  • VAT position by line. Some intercompany lines may be standard-rated (e.g., on-the-ground support in the UAE); split and invoice separately.
  • Audit pack. Agreement + pricing memo + sample invoices + evidence of performance/location.

Returns after export — credit notes, VAT adjustments, inventory write-backs

  • Identify the cause. Defect, cancellation, or commercial return — keep customer correspondence.
  • Reverse the trail. Import/return docs back into the UAE (or proof of destruction abroad), warehouse intake, and customer credit note.
  • VAT adjustments. Issue a credit note referencing the original Tax Invoice; adjust the VAT return for that period.
  • Inventory. Record write-backs or write-offs; keep a stock reconciliation showing the returned items and their condition.

Quick Tools for EU/US Teams

One-page goods evidence checklist (printable)

  • Contract, Tax Invoice (TRN), packing list.
  • Transport doc (AWB/B/L/CMR) with matching parties, goods, and dates.
  • Customs exit proof; delivery/arrival confirmation (if applicable).
  • Bank receipt; third-party payer letter (if used).
  • Internal "match test" box ticked (parties, quantities, HS codes if used, route, dates).

One-page services zero-rating checklist

  • Customer established outside the UAE (evidence on file).
  • Scope shows use outside the UAE; no in-UAE performance that flips the rate.
  • Deliverables/acceptance docs tie to offshore use.
  • Time sheets/reports and key emails saved.
  • Invoice language states zero-rating basis; payment proof attached.

FTA extension request template (cover letter + annex list)

  • Cover letter: reason for delay, shipment ID, expected date for final docs, responsible contact.
  • Annexes: contract, Tax Invoice, packing list, current transport docs, carrier/terminal letters, booking confirmations.
  • Closing: commitment to submit finals by a date; request for extension approval.

Doc-match worksheet (what fields must align across all documents)

  • Parties (legal names), addresses, TRN.
  • Goods description, quantities, weights, marks/serials.
  • Route: load/discharge ports, airports, places of loading/unloading.
  • Dates and transport references (flight/voyage/truck).
  • Amounts and currencies; exchange rate source/date (if used).

Light-Touch Support (Optional)

Evidence audit, FTA correspondence, return prep, and staff training

Need a sanity check without heavy consulting? We can run a short evidence audit, help prepare or review letters to the FTA (including extension requests), tidy up VAT returns for zero-rated lines, and train your team on document matching and monthly controls—so your exports stay defensible with minimal overhead.
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