A UAE business billing a client abroad does not get to charge 0% simply because the invoice leaves the country. Article 31 of the VAT Executive Regulation sets three conditions that must all hold, and a 2024 amendment added a fourth hurdle that blocks zero-rating where the benefit of the service is really received inside the UAE. Zero-rating is not the same as being outside VAT: you still register, still file, and still recover input tax.

The condition people get wrong is the second one. It is not enough that the client is foreign. The service must also not be supplied directly in connection with real estate or moveable assets situated in the UAE, and must not fall into one of the special place-of-supply rules that anchor a service to where it is performed.

This guide sets out each condition, the 30-day test that decides whether a recipient counts as outside the State, the anti-avoidance rule added by Cabinet Decision No. 100 of 2024, and why getting this wrong is more expensive than charging 5% would have been. The opposite direction is covered in the reverse charge on services bought from abroad.

The Three Conditions in Article 31(1)(a)

Zero-rating under the main route requires all three of the following to be satisfied. Fail one and the supply is standard-rated at 5%, regardless of where the client sits or what currency you invoiced in.

Condition What it requires
1. The recipient Has no place of residence in an Implementing State, and is outside the State at the time the services are performed
2. The subject matter Not supplied directly in connection with real estate situated in the State or any improvement to it, nor directly in connection with moveable assets situated in the State at the time the services are performed
3. The place of supply Not treated as performed in the State or in a Designated Zone under Clauses 3 to 8 of Article 30, or Article 31, of the Decree-Law

Two alternative routes sit alongside that test. Under Article 31(1)(b), services actually performed outside the Implementing States, or the arranging of services actually performed outside them, are zero-rated. Under Article 31(1)(c), the facilitation of outbound tour packages is zero-rated for that part of the service, with Article 31(4) defining it as packaging one or more tourism products and services outside the Implementing States, including accommodation, meals, transport and other activities.

Condition Three Is a List, Not a Principle

The third condition sends you to the Decree-Law’s special place-of-supply rules, and those rules are what catch most misclassified invoices. Under Article 30 of the Decree-Law, the place of supply is fixed as follows:

  • Services provided on goods, such as installing goods supplied by others: where the services were performed.
  • Supply of means of transport to a lessee who is not a taxable person in the State and holds no TRN in an Implementing State: where the transport was placed at the lessee’s disposal.
  • Restaurant, hotel, and food and drink catering services: where actually performed.
  • Cultural, artistic, sporting, educational or similar services: where performed.
  • Services related to real estate as specified in the Executive Regulation: where the real estate is located.
  • Transportation and transport-related services: where the transportation starts.

Article 31 of the Decree-Law adds telecommunications and electronic services, whose place of supply follows actual use and enjoyment, in the State to the extent used here and outside it to the extent used there, regardless of where the contract was signed or payment made.

So a UAE training company delivering a course in Dubai to delegates flown in by a foreign parent has performed an educational service here. The client being overseas does not move it.

The 30-Day Test for “Outside the State”

Article 31(2) defines it numerically. A person is considered outside the State if they only have a presence in the State of less than 30 days and that presence is not effectively connected with the supply.

Both limbs matter. A short visit that has nothing to do with the engagement does not break the condition. A visit of any length that is effectively connected with the supply does, and there is no de minimis for connected presence. A foreign client who flies in for two days of workshops that form part of the very service you are billing has a presence effectively connected with the supply.

This clause was amended by Cabinet Decision No. 46 of 2020, which replaced a vaguer earlier formulation with the current test. Anything written before then describes a rule that no longer applies.

The 2024 Anti-Avoidance Rule

Article 31(3), added when the Article was amended by Cabinet Decision No. 100 of 2024, disapplies zero-rating even where the main conditions are met. Where the agreement is entered into, directly or indirectly, with a non-resident recipient, the supply is not zero-rated if two things are both true.

First, the performance of the services is, or it is reasonably foreseeable that it will be, received in the State by another person, including but not limited to an employee or a director of the non-resident recipient. Second, it is reasonably foreseeable at the time the agreement is entered into that the other person in the State will receive services for which input tax is not recoverable in full under Article 54 or Article 57 of the Decree-Law.

The structure it targets is a familiar one: a foreign entity contracts and pays for a service whose actual beneficiary is a person here who could not have recovered the VAT had they bought it directly. Both conditions have to hold, so the rule does not sweep in every arrangement with a foreign counterparty, and both are tested against what was reasonably foreseeable when the agreement was made rather than what happened afterward.

Why the Date on Your Guidance Matters

Article 31 has been amended twice in recent memory: Clause 2 by Cabinet Decision No. 46 of 2020, and the Article as a whole by Cabinet Decision No. 100 of 2024. A great deal of the material circulating online predates the second amendment and describes a three-condition test with no Clause 3 in it. Check the version you are relying on against the consolidated Executive Regulation published by the Federal Tax Authority.

Zero-Rated Is Not Exempt

A zero-rated supply is a taxable supply carrying a rate of 0%. An exempt supply is outside the charge. The difference decides whether you can recover the input tax on your costs, and it decides whether the turnover counts toward registration.

A consultancy that exports everything it sells is making taxable supplies at 0%. It can register, recover input tax on its rent, software and professional fees, and receive refunds where input exceeds output. A business making exempt supplies cannot. Getting this backwards is the reason some exporters never register and quietly absorb VAT they were entitled to reclaim. Thresholds and the input recovery rules are covered in UAE VAT registration thresholds and the EmaraTax process.

What Getting It Wrong Costs

If the FTA reclassifies a zero-rated invoice as standard-rated, the 5% was always due. You will usually have no practical way to go back to a foreign client for it years later, so the tax comes out of your margin, alongside penalties on the under-declared amount. Correcting it before the Authority finds it is materially cheaper, and the mechanism is set out in UAE tax penalties and voluntary disclosure. Return mechanics are in filing the UAE VAT return on Form VAT201.

Evidence to Keep on File

The Regulation sets the test but not a prescribed evidence pack, which means the burden of showing each condition was met sits with you and is discharged with ordinary commercial documents. Build the file at the time of the engagement, not when a query arrives.

  1. Proof of the client’s place of residence. An overseas registration or incorporation document, and an address that is not in an Implementing State.
  2. Evidence of where the recipient was while the services were performed, which is what condition one turns on, along with any record of visits and their purpose for the 30-day test.
  3. A scope of work that shows what the service was connected to. This is the document that answers condition two on real estate and moveable assets in the UAE.
  4. Where the work was performed, if you are relying on Article 31(1)(b) rather than the main route.
  5. A note on who benefits, recording whether any person in the State was expected to receive the performance, which is the Article 31(3) question.
  6. The contract itself, dated, because the Clause 3 tests are applied as at the time the agreement was entered into.

Businesses in a free zone have a further layer, because Designated Zone rules and the corporate tax qualifying-income rules run on separate definitions. Those are covered in free zone qualifying income under UAE corporate tax, and should not be assumed to align with the VAT position.

Where This Guide Stops

Article 31 covers services generally. Exported telecommunications services have their own rules in Article 32, and international transportation has its own in Article 33, both with different tests. Exported goods sit under a separate article again. And zero-rating is a VAT question only: it says nothing about whether the income is taxable for corporate tax, where a different set of rules applies to the same invoice.

One honest limitation. The Regulation does not publish a checklist of acceptable evidence for each condition, so the list above reflects what the conditions require you to prove rather than a prescribed FTA format. If a specific engagement is finely balanced, a clarification request to the Authority is the route that produces certainty.

Frequently Asked Questions

Is a service billed to a foreign client automatically zero-rated in the UAE?

No. Article 31(1)(a) of the Executive Regulation requires three conditions to be met together: the recipient has no place of residence in an Implementing State and is outside the State when the services are performed, the services are not directly connected with UAE real estate or moveable assets, and the place of supply is not fixed in the State by the special rules in the Decree-Law.

What counts as being outside the State?

Article 31(2) treats a person as outside the State if they only have a presence in the State of less than 30 days and that presence is not effectively connected with the supply. A visit connected with the supply breaks the condition regardless of its length, so both limbs of the test have to be satisfied.

What changed in Article 31 in 2024?

Cabinet Decision No. 100 of 2024 amended the Article and introduced Clause 3, which disapplies zero-rating where an agreement is made directly or indirectly with a non-resident recipient, the performance is reasonably foreseeably received in the State by another person such as an employee or director, and it is reasonably foreseeable that this person could not recover the input tax in full under Article 54 or 57 of the Decree-Law.

Can I zero-rate work connected to a property in Dubai for an overseas owner?

No. The second condition in Article 31(1)(a) excludes services supplied directly in connection with real estate situated in the State or any improvement to it. Separately, Article 30(7) of the Decree-Law fixes the place of supply for real-estate-related services at where the real estate is located, so the third condition fails as well.

Is zero-rated the same as exempt?

No, and the difference is financial. A zero-rated supply is taxable at 0%, so input tax on the related costs remains recoverable and the turnover counts as taxable supplies. An exempt supply carries no VAT and no input recovery. Exporters treating their sales as exempt often forgo refunds they were entitled to claim.

Do I still have to register for VAT if everything I sell is exported?

Zero-rated sales are taxable supplies, so they count when testing the registration thresholds. Registration also allows recovery of input tax on UAE costs, which usually makes it worth doing even where turnover would permit staying outside the system.

What happens if the FTA reclassifies my zero-rated invoices?

The 5% is treated as having been due all along, and recovering it from a foreign client after the fact is rarely practical, so it comes out of your margin along with penalties on the under-declared tax. Correcting the position through a voluntary disclosure before the Authority raises it is materially cheaper.

Are exported telecoms or transport services covered by Article 31?

No. Exported telecommunications services have their own rules in Article 32 of the Executive Regulation, and international transportation services for passengers and goods are dealt with in Article 33. Each applies its own conditions rather than the Article 31 test.

What about a tour package sold to travel outside the UAE?

Article 31(1)(c) zero-rates the facilitation of outbound tour packages for that part of the service. Article 31(4) defines it as packaging one or more tourism products and services outside the Implementing States, including accommodation, meals, transport and other activities.

What evidence do I need to support zero-rating?

The Regulation sets the conditions but prescribes no evidence pack, so the burden falls on you. Keep proof of the client’s overseas place of residence, records of where the recipient was while the services were performed and of any UAE visits and their purpose, a scope of work showing what the service connected to, and a dated contract, since the Clause 3 tests are applied as at the time the agreement was entered into.

Official Sources

Information is current as of August 2026. Regulations and rates are subject to change. Verify requirements with official authorities before proceeding.

This guide is for informational purposes only and is not tax advice. UAE regulations are subject to change. Always verify current requirements with the Federal Tax Authority or a registered tax agent before acting.