Place of supply: what it means in UAE tax.

What place of supply means

The place of supply is the location where a supply is treated as happening for VAT purposes. It answers one question: is this sale inside the scope of UAE VAT or not? Only supplies with a place of supply in the UAE can attract UAE VAT, whether at 5% or at the zero rate.

For goods, the starting point is where the goods are when supplied, with special rules for exports, imports and goods that are installed or assembled. For services, the general rule is the place of residence of the supplier, but many exceptions override it. Services connected with UAE real estate are supplied where the property is. Restaurant, hotel and catering services, and cultural, sporting and educational events, are supplied where they are performed. Telecommunications and electronic services follow where they are used and enjoyed.

For an SME selling across borders, getting the place of supply right comes before any question of rate. A wrong answer can mean charging VAT that is not due, or missing VAT that is.

How it works

• Goods supplied within the UAE, with no export or import, have a place of supply in the UAE.
• Services are generally supplied where the supplier has its place of residence (its place of establishment or fixed establishment most closely connected with the supply).
• When a UAE business receives services from a supplier with no UAE residence, the place of supply is the UAE and the reverse charge usually applies.
• Services directly connected with real estate, such as estate agency, construction and maintenance, are supplied where the property is located.
• Electronic services such as software, streaming and online advertising are supplied where they are actually used and enjoyed.

Worked example

An interior design studio in Dubai works for a client who lives in London. The client wants a redesign of a Dubai villa and a separate branding report for a UK business.

Villa design fee (real estate in the UAE)	AED 60,000
VAT at 5% on villa design	AED 3,000
Branding report fee (zero-rated export of services)	AED 40,000
VAT at 0% on branding report	AED 0
Total VAT charged to the client	AED 3,000

The same overseas client gets two different outcomes because services tied to UAE property are supplied where the property is.

Common mistakes

• Assuming any customer abroad means zero-rating, even when the service relates to UAE property or is performed in the UAE.
• Ignoring the place of supply of services bought from overseas suppliers, which often triggers the reverse charge.
• Treating a sale in a free zone as outside the UAE when the free zone is not a designated zone, or the supply is of services.

The law

• Federal Decree-Law No. 8 of 2017 on Value Added Tax, Articles 27, 29, 30, 31 and 32
• Cabinet Decision No. 52 of 2017 (Executive Regulation of the VAT law), Articles 21, 23 and 31

Frequently asked questions

Is the place of supply the same as where the invoice is sent?

No. The address on the invoice does not decide it. The rules look at the type of supply, where the parties are resident, and in some cases where the service is performed or used.

What is a place of residence for VAT?

It is where a business has its place of establishment or a fixed establishment, such as a branch with enough people and resources to make or receive supplies.

Related terms

Zero-rated supply · Designated zone · Reverse charge mechanism · Taxable supply · Permanent establishment. See every term in the UAE tax glossary.

For the full picture, read our guide: Corporate Tax and VAT for E-commerce Sellers in the UAE.

Need help with VAT returns? See our VAT returns service.