When it comes to UAE VAT compliance, determining the Place of Supply is one of the most critical—and often misunderstood—rules. The place of supply determines which VAT rate applies, and who is responsible for charging and reporting VAT.
For businesses involved in local trading, cross‑border transactions, imports, exports, or services delivered across jurisdictions, getting the place of supply wrong can lead to incorrect VAT treatment, penalties, and compliance risks.
This article explains the concept of place of supply under UAE VAT in a clear, practical manner, covering both goods and services, along with key exceptions businesses should be aware of.
What Is the Place of Supply Under UAE VAT?
Under UAE VAT law, the place of supply refers to the location where a supply of goods or services is considered to take place for VAT purposes. This concept is crucial because VAT can only be charged if the place of supply is considered to be inside the UAE (unless specific zero‑rating rules apply).
The UAE VAT framework sets out default rules and special rules for determining the place of supply, depending on whether the transaction involves goods or services.
Place of Supply of Goods
1. Goods Supplied Without Transportation
When goods are supplied without being transported, the place of supply is the location of the goods at the time the supply takes place.
Example:
If goods are sold and handed over within the UAE without movement, the place of supply is the UAE, and VAT generally applies.
2. Goods Supplied With Transportation
When goods are supplied with transportation, the place of supply is the location where the transportation of goods begins.
Example:
If goods are dispatched from the UAE to another country, the place of supply is the UAE. However, such supplies may qualify for zero‑rating, subject to meeting export conditions.
3. Import of Goods into the UAE
Goods imported into the UAE have a place of supply inside the UAE, and VAT is generally payable at the point of import, unless a VAT deferment or exemption applies.
4. Export of Goods from the UAE
Exports of goods where transportation starts in the UAE and ends outside the UAE may qualify as zero‑rated supplies, provided all documentary and compliance requirements are met.
Place of Supply of Services
Unlike goods, services do not have a physical location, making the determination of place of supply more nuanced.
General Rule for Services
As a general rule, the place of supply of services is the location of the supplier’s place of residence.
Example:
If a UAE‑resident business provides consultancy services, the place of supply is the UAE, even if the client is located outside the UAE—unless a specific exception applies.
Special Place of Supply Rules for Services
The UAE VAT law provides several important exceptions to the general rule:
1. Services Related to Real Estate
The place of supply is the location of the real estate.
Example:
Property management or brokerage services relating to UAE real estate are treated as supplied in the UAE, regardless of where the supplier or customer is located.
2. Transportation Services
The place of supply is where the transportation actually takes place, based on the proportion of distance covered in the UAE.
3. Restaurant, Catering, and Hospitality Services
The place of supply is where the services are physically performed.
4. Telecommunications and Electronic Services
Special rules apply depending on the location of use and enjoyment, particularly for services provided to non‑registered persons.
5. Cultural, Educational, and Event‑Related Services
The place of supply is where the event or activity takes place.
Why Place of Supply Is Critical for Businesses?
Incorrect determination of the place of supply can result in:
- Charging VAT when it should not be charged
- Failing to charge VAT when it is required
- Incorrect application of zero‑rating or exemptions
- Penalties, fines, and reassessments by the FTA
- Cash‑flow and pricing issues
For businesses involved in international trade, group services, logistics, consulting, or digital services, place of supply is often the deciding factor for VAT treatment.
Common Challenges Businesses Face
- Distinguishing between goods and services in complex transactions
- Applying the correct exception rule
- Managing cross‑border service supplies
- Maintaining documentation to support zero‑rating
- Understanding use‑and‑enjoyment provisions
These challenges make professional VAT advice essential.
How MBB Auditing Can Help?
At MBB Auditing, we support businesses across the UAE with end‑to‑end VAT advisory and compliance services, including:
- Determining the correct place of supply for goods and services
- VAT impact analysis for cross‑border transactions
- Review of contracts and invoicing structures
- Assistance with zero‑rating and exemption conditions
- VAT registration, returns, and FTA compliance support
- Handling VAT audits and FTA clarifications
Our VAT specialists combine technical expertise with practical business insight, ensuring your transactions are structured correctly and remain fully compliant with UAE VAT law.
Final Thoughts
The place of supply is not just a technical VAT concept—it directly affects your tax exposure and compliance position. With evolving business models and cross‑border operations becoming the norm, understanding and applying the correct place of supply rules is more important than ever.
If you are unsure about the VAT treatment of your transactions, seeking expert advice early can help avoid costly mistakes.
