Cross-Border Services and UAE VAT: Zero-Rating Rules

Clarification and navigation of the new zero-rating rules for cross-border services under the UAE VAT regime.

How the updated UAE VAT zero-rating rules apply to cross-border services, and what businesses should review to stay compliant.

By Nour Attorneys / 22 August 2026

Reviewed by Mohamed Noureldin, Founder, Managing Partner & Senior Legal Consultant

Cross-Border Services and UAE VAT: The New Zero-Rating Rules

The November 2024 amendments to the UAE’s VAT Executive Regulations have introduced important clarifications on the zero-rating of exported services. The changes are designed to ensure that zero-rating is applied correctly and that services consumed within the UAE are subject to VAT. This is a complex area, and businesses that provide cross-border services will need to carefully review the VAT treatment of these supplies to ensure that they remain compliant.

Related services: See our commercial dispute resolution and cross-border debt recovery services for practical legal support in this area.

The Challenge: Defining the "Place of Consumption"

The zero-rating of exported services is a key feature of the UAE’s VAT system. It is designed to ensure that UAE businesses are not at a competitive disadvantage when they provide services to customers outside the UAE.

However, the rules for deciding whether a service is “exported” can be complex. This is particularly true when the service is provided to a non-resident who is physically present in the UAE when the service is performed.

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A Clearer Framework for Zero-Rating Cross-Border Services

The new regulations provide a clearer and more robust framework for determining the place of consumption of services. This will help ensure that zero-rating is applied correctly and that services consumed within the UAE are subject to VAT.

Related: See our labour and employment law advisory services.

Key Clarifications in the New Zero-Rating Rules

1. A Focus on the Place of Consumption

The new rules place greater emphasis on where the service is consumed. A service will only be zero-rated if it is not consumed in the UAE.

This means that even if the recipient of the service is located outside the UAE, the service may still be subject to VAT if it is consumed within the UAE.

2. The "Directly Connected With" Test

The new rules introduce a "directly connected with" test for services supplied in connection with real estate or goods.

If a service is directly connected with real estate located in the UAE, or with goods that are physically located in the UAE at the time the service is performed, the service will be considered to be consumed in the UAE and will be subject to VAT.

Related: See our corporate governance advisory services.

3. The "Physically Present" Test

The new rules also introduce a "physically present" test for services supplied to a non-resident who is physically present in the UAE at the time the service is performed.

If the service is supplied to a non-resident who is physically present in the UAE, and the service is not connected with the non-resident’s business activities outside the UAE, the service will be considered to be consumed in the UAE and will be subject to VAT.

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Conclusion: A More Level Playing Field

The new rules on the zero-rating of exported services are designed to create a more level playing field for all businesses in the UAE. They will help ensure that services consumed within the UAE are subject to VAT, regardless of where the recipient is located.

This will prevent a situation where UAE-based businesses are at a competitive disadvantage compared to foreign businesses that provide similar services to customers in the UAE.

The new rules on the zero-rating of exported services are complex, and businesses that provide cross-border services will need to carefully review their VAT treatment of these supplies. At Nour Attorneys Law Firm, our team of tax specialists can advise on all aspects of the new rules and help you understand your obligations and remain fully compliant. Contact us for advice on cross-border VAT in the UAE.

Disclaimer: The information provided in this article is for general informational purposes only and does not constitute legal advice. Readers should seek professional legal advice tailored to their specific circumstances before making any decisions or taking any action based on the content of this article.

Nour Attorneys Team

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