Understanding place of supply in the United Arab Emirates

What is the place of supply?
The place of supply is where a transaction is considered to have occurred for VAT purposes. Place of supply is determined differently for goods and for services.

For the supply of goods, the place of supply is the location of the goods when the supply occurs. Special rules apply when there is a cross-border supply, supply of water and energy, or supply of real estate.

For the supply of services, the place of supply should be where the supplier is established. Special rules apply to cross-border supplies between businesses and to electronic services.

In this document, we will discuss the cases that determine the place of supply:

Place of supply of goods

• Domestic supplies
  When the delivery is made within the state, the place of supply is the UAE. For example, if a furniture dealer supplies a sofa set from Abu Dhabi to a customer in Sharjah, the place of supply is the UAE.

• Exports to outside GCC
  If the goods are dispatched from the UAE to a non-GCC member state, the place of supply is the UAE. For example, company A supplies machinery to a customer in London, UK and declares the finished goods for export in the UAE. Here the place of supply is the UAE.

• Intra-GCC supplies
  When goods are transported from UAE to another GCC member state, the place of supply depends on whether the customer is a VAT taxable person.
  
  (i) If the customer is a VAT-registered taxable person, then the place of supply is the member state that is the goods’ final destination.
  For example, if a supplier in UAE sells confectioneries to a VAT-registered customer in the KSA, the place of supply is the KSA. This also requires the customer to pay the VAT under the reverse-charge mechanism.
  
  (ii) If the customer is not a VAT-registered taxable person, the place of supply depends on whether the supplier exceeds the VAT export threshold.

Import

• Import of goods into UAE
  The place of supply for imported goods is the country where the goods are declared for consumption. Suppose a businessman in Abu Dhabi imports perfumes from the UK. The place of supply is Abu Dhabi, and the supplier pays the VAT under the reverse-charge mechanism.
   

• Import of goods into UAE for re-export to another GCC state
  If goods are imported into the UAE, by default the place of supply of import is the UAE. But if the importer expects to transfer the goods into another GCC state, special conditions apply.
  (i) The importer should pay import VAT without using the reverse charge, and cannot recover the VAT.
  (ii) The import VAT can only be recovered in the GCC state where the goods are transferred.

• Goods imported in UAE and later transferred to another GCC state
  If an importer pays import VAT and recovers it under the expectation that the goods will stay in the UAE, but later re-exports the goods to another GCC state, the transfer will be treated as a deemed supply subject to VAT. The importer will need to repay the import VAT.
   

Place of supply of services

Basic rule
The place of supply for services provided by a taxable supplier is where the supplier has their place of residence.
This basic rule always applies unless overridden by a special rule.

Exceptions to basic rule

• Imports from outside GCC
  If the supplier is a non-UAE resident who provides service to a VAT-registered resident in the UAE, then the place of supply is the UAE.

• Installation
  The place of supply for installation services is where the installation is done.

• Real estate related services
  This type of service includes:
  (i) Real estate experts and agent services
  (ii) Granting the right to possess or use real estate
  (iii) Services related to construction work   The place of supply for real estate services is where the real estate is located.

• Hotel and restaurant service
  For restaurants, hotels, and catering services, the place of supply is where the services are performed.

• Telecommunication and electronically-supplied services
  The place of supply for wired and wireless telecommunication services and electronically-supplied services will be the location where the services are used or received.

• Cultural services
  For cultural, art, sports, educational, or similar services, the place of supply is where the services are performed.

• Passenger transportation services
  The place of supply for passenger-related transportation services is the location where the transportation begins.  

Reverse charge
The reverse-charge mechanism applies whenever a VAT-registered person imports any good or service into the UAE that is subject to VAT in the UAE. Read more about the reverse charge mechanism.