Place of supply in case of export of goods

Tally Solutions | Updated on: February 5, 2020

In the previous article, we have learnt about place of supply and how to determine place of supply of goods. In this article, let us learn how to determine the place of supply in case of export of goods from UAE under VAT in UAE.

Export of goods can be divided into 2 categories for determining the place of supply:

Export to a non-GCC VAT implementing State
Export to a GCC VAT implementing State

Place of supply in case of export to non-GCC VAT implementing State

A non-GCC VAT implementing State includes member States of GCC which have not implemented VAT as well as countries outside the GCC. When goods are exported from UAE to a non-GCC VAT implementing State, the place of supply will be UAE. Hence, UAE VAT will be applicable on the supply.

Example: Jehan & Co, a registered dealer in Abu Dhabi supplies 10 monitors @ AED 500 to a customer in India.

Here, since the recipient is in a country outside the GCC region, the place of supply is UAE and UAE VAT will be applicable on the supply. Under UAE VAT, export to a non-GCC VAT implementing state is zero-rated, provided certain conditions are met. To learn more about the conditions to be fulfilled for an export to qualify as a zero-rated supply, you can refer our article export of goods to non-GCC VAT implementing States. Hence, this supply is a zero rated supply.

Place of supply in case of export to a GCC VAT implementing State

When goods are exported from UAE to a GCC VAT implementing State, the place of supply depends on whether the recipient is registered under VAT in the member State. If the recipient is not registered under VAT in the member State, the value of exports by the supplier to the member State in comparison to the mandatory registration threshold in the State, plays a role in determining the place of supply. Hence, the scenarios of export to a GCC VAT implementing State can be divided into 3 categories:

Recipient is registered for VAT in the member State
Recipient is not registered for VAT and the value of exports by the supplier to the member State does not exceed the mandatory registration threshold in the member State
Recipient is registered for VAT and the value of exports by the supplier exceeds the mandatory registration threshold in the member State

Let us understand the place of supply in these scenarios and who is liable to pay VAT in each of these scenarios:

Is recipient registered for VAT in GCC member State?	Is the value of exports by the supplier to the member State above the mandatory registration threshold in the State?	Place of supply	VAT to be paid by	Example
Yes	Not applicable	Destination State	Recipient	Jehan & Co., a registered dealer in Abu Dhabi supplies 10 monitors @ AED 500 to a registered dealer, Ali Electronics, in KSA (Saudi Arabia). Here, the place of supply will be KSA and KSA VAT will be applicable on the supply. Ali Electronics has to pay VAT on import of the monitors, on reverse charge basis.
No	No	UAE	Supplier	Jehan & Co., a registered dealer in Abu Dhabi supplies 10 monitors @ AED 500 to an unregistered customer, Mr. Rohan, in KSA. As Mr. Rohan is unregistered for VAT in KSA, the value of Jehan & Co.’s exports to KSA in the year needs to be checked. The value of exports by Jehan & Co. to KSA in the year is SAR 150,000, which does not exceed the mandatory registration threshold of SAR 375,000 in KSA. In this case, the place of supply is UAE and UAE VAT @ 5% has to be charged on the supply by Jehan & Co.
No	Yes	Destination State	Supplier	Jehan & Co., a registered dealer in Abu Dhabi supplies 10 monitors @ AED 500 to an unregistered customer, Mr. Rohan, in KSA. As Mr. Rohan is unregistered for VAT in KSA, the value of Jehan & Co.’s exports to KSA in the year needs to be checked. The value of exports by Jehan & Co. to KSA in the year is SAR 400,000, which exceeds the mandatory registration threshold of SAR 375,000 in KSA. In this case, Jehan & Co. has to be registered under VAT in KSA. Here, the place of supply is KSA and it will be treated as a domestic supply between Jehan & Co. and Mr. Rohan in KSA. KSA VAT has to be charged on the supply by Jehan & Co.

Hence, place of supply in the case of export of goods depends upon the scenario of export. Tax payers can use this guide to ensure that the correct tax is charged in each scenario of export of goods as per the guidelines by FTA under VAT in UAE.