Exporting services from the UAE? Zero-rated sales still count towards VAT registration

Many UAE consultancies, IT firms and other service businesses bill only clients outside the country. Because those sales are usually zero-rated, it is easy to assume VAT does not concern them. It does: zero-rated sales count towards the VAT registration threshold, and a business that crosses it has 30 days to apply — whether it then registers or asks for an exception.

Zero-rated sales count towards the AED 375,000 threshold

A UAE-based business must register for VAT when the value of its taxable supplies over the previous 12 months exceeds AED 375,000, or when it expects them to exceed that amount in the next 30 days. A taxable supply is any supply made in the course of business that is not exempt — so supplies taxed at 0% are included alongside those at 5%.

A business with AED 400,000 of export invoices and no UAE sales has therefore crossed the mandatory threshold, even though it would not charge VAT on any of those invoices.

When is an export of services zero-rated?

Under the VAT Executive Regulation, a supply of services can be zero-rated as an export where, among other conditions:

the recipient has no place of residence in the UAE (or another GCC state applying VAT) and is outside the UAE when the services are performed;
the services are not supplied directly in connection with real estate in the UAE; and
the services are not treated as performed in the UAE under the special place-of-supply rules.

Keep the evidence on file: the contract, the invoices, and proof of where the client is established and where it receives the services. A director or employee of the client visiting the UAE briefly does not necessarily change the position, but the conditions are applied supply by supply, so each new client deserves a quick check.

Working out your registration date

The test is applied on a rolling basis. Once the total for the previous 12 months goes over AED 375,000, the application must be submitted within 30 days, and the FTA registers the business from the first day of the month following the month in which the obligation arose.

The figure that matters is the value of supplies by their date of supply, not the money received. For services, the date of supply is generally the earliest of completion, receipt of payment or the tax invoice; for regular billing under one contract, the invoice and payment dates drive it. Working from bank receipts can therefore put the date a month too late.

Example	A consultancy invoices an overseas client every week. Its running total reaches exactly AED 375,000 with an invoice dated 24 August and goes over the threshold with the invoice dated 31 August.
Threshold exceeded	In August, with the invoice of 31 August
Application due	Within 30 days — by 30 September
Registration effective	1 September

Reaching AED 375,000 exactly is not enough; the total must exceed it. Businesses on a steady upward trend should also check the forward-looking test, which can bring the obligation earlier.

The late-registration penalty

Failing to submit a registration application within the timeframe in the law carries a fixed administrative penalty of AED 10,000. The amount was left unchanged when the penalty framework was revised with effect from 14 April 2026. Applying as soon as the problem is spotted keeps the position from getting worse: VAT returns are still due from the effective date, and filing those late brings separate penalties.

Once a penalty is imposed, a business can ask the FTA to reconsider it within 40 business days of being notified, setting out its circumstances. The FTA decides within 40 business days of receiving the request.

Registration or an exception?

A business whose supplies are only zero-rated can ask the FTA for an exception from registration instead. The exception is at the FTA's discretion and is requested by a business that would otherwise have to register, so it does not move the date the obligation arose. In our view, a late request is likely to be treated in the same way as a late registration application.

Registration	Quarterly VAT returns (at 0% on export sales); VAT on UAE business costs — rent, software, professional fees — can be recovered; zero-rated tax invoices from the effective date.
Exception	No VAT returns; no recovery of VAT on costs; the FTA must be told if the business starts making supplies that are not zero-rated, for example to UAE customers.

For a business with very few UAE costs and no plans to sell locally, the exception can mean less compliance work. Where UAE costs are significant, or UAE clients are likely, registration is usually the more practical route. The choice turns on the business's own figures.

A practical checklist

Add up invoices for each rolling 12-month period, by invoice date, and find when the total first goes over AED 375,000.
Check each client against the export conditions and keep the evidence.
Decide between registration and an exception, then apply on EmaraTax without delay.
Until the VAT number is issued, do not show a VAT number on invoices. Once it is, review invoices dated from the effective date.
If a penalty is imposed, consider a reconsideration request within 40 business days.

We handle VAT registrations and exception requests for service exporters, and the quarterly returns that follow — see our VAT services or ask for a proposal. For other dates, see our VAT due dates and penalties guide.

Sources: Federal Decree-Law No. 8 of 2017 on Value Added Tax, as amended (Articles 1, 13, 15, 19, 25, 26 and 45); Cabinet Decision No. 52 of 2017 on the Executive Regulation of the VAT Decree-Law, as amended (Articles 7 and 31); Cabinet Decision No. 40 of 2017 on administrative penalties, as amended by Cabinet Decisions No. 49 of 2021 and No. 129 of 2025; Federal Decree-Law No. 28 of 2022 on Tax Procedures (Article 29).

This article is general information, current at the date shown, and not advice on your specific situation. Get in touch for advice on your own company.