Accounting and tax for consultancies and IT service companies
If you bill clients abroad, three assumptions cost UAE service businesses the most: that VAT does not apply, that a free zone means 0% Corporate Tax, and that payments to the owners do not matter. We help make sure none of them catches you out.
Three common assumptions — and the actual position
| "We only bill overseas, so VAT does not apply" | Zero-rated export sales still count towards the AED 375,000 threshold. Registration — or an exception — must be applied for within 30 days of crossing it. |
| "We are in a free zone, so we pay 0%" | Consulting and IT services are not qualifying activities. Income from customers outside the free zone, including overseas clients, is generally non-qualifying — and above the de minimis limit the company loses the 0% rate altogether. |
| "Payments to the owner are our business" | Payments to owners, directors and related companies must be at market value for Corporate Tax, and may need to be disclosed. |
Our article on VAT registration for exporters of services explains the VAT rules in detail.
How we help
- We work out your VAT registration date from your invoices and handle the registration or exception — see VAT registration.
- We keep evidence for zero-rated exports so the position stands up if the FTA asks.
- We set up monthly bookkeeping with revenue analysed by customer location and type, which the Corporate Tax and free zone analysis depend on.
- With experience in cross-border taxation, we review owner remuneration, group recharges and contracts with overseas entities for transfer pricing — see transfer pricing and cross-border tax.
- If a deadline has already been missed, we help with the late application and, where there are grounds, a penalty reconsideration request.
Sources: Federal Decree-Law No. 8 of 2017 on VAT, as amended (Articles 13, 15 and 45), and Article 31 of its Executive Regulation; Federal Decree-Law No. 47 of 2022 on Corporate Tax (Articles 18, 34 to 36 and 55); Cabinet Decision No. 100 of 2023 and Ministerial Decision No. 265 of 2023.
Frequently asked questions
Are services to overseas clients always zero-rated?
Not always. Zero-rating depends on where the client is and on conditions such as the service not being used or enjoyed in the UAE. We review your contracts and clients.
Can a free zone consultancy still benefit from 0%?
Only on qualifying income, for example certain transactions with other free zone persons where the conditions are met. Most consultancy income from overseas or mainland clients is non-qualifying.
Do I need transfer pricing documentation as a small firm?
Full master and local files apply only above high thresholds, but transactions with related parties and connected persons must still be at market value and may need to be disclosed with the return.
Ready to hand over your books and returns?
Tell us about your company and we'll send a fixed-fee proposal within one business day.