UAE tax support for agencies & consultants
Service businesses in the UAE deal with retainers, milestone billing, reimbursed costs, overseas clients and owner transactions. Each of these has a specific VAT and Corporate Tax treatment that generic "export zero-rating" advice tends to get wrong.
"Overseas client = no UAE VAT" is not automatic
Export of services zero-rating depends on specific conditions in the UAE VAT Executive Regulation, including the recipient's location at the time of supply and the place of use/enjoyment of the service. A foreign billing address alone does not make a supply zero-rated.
Common service-business tax issues
Retainers vs milestones
Monthly retainers trigger a continuous supply; milestone billing triggers VAT at each invoice. Document the pattern in the engagement letter so it is unambiguous.
Overseas client evidence
To support zero-rating, retain the engagement letter, communications and payment evidence showing the client is outside the UAE at the time of supply. Keep this per engagement.
Recharges and disbursements
Travel, print and third-party costs recharged to clients: distinguish genuine disbursements (acting as agent, pass-through) from recharges that are part of your taxable supply.
Owner transactions
Owner salaries, directors' fees and expense reimbursements may be related-party transactions for CT. They need to be at arm's length and documented.
Contractor vs employee
Freelancers invoicing with their own TRN vs individuals under your sponsorship are treated differently for VAT and expense recognition. Clarify the model.
CT close
Deferred revenue on retainers, accrued expenses on open projects and WIP valuation drive the year-end tax number. A clean WIP file saves days in tax season.
Frequently asked questions
Are overseas clients automatically zero-rated?
No. Export of services requires the specific conditions in the VAT Executive Regulation to be met and evidenced. We review the engagement, the service, the recipient's location and the place of use before concluding zero-rated.
When is a retainer taxed?
A monthly retainer is typically a continuous supply, with VAT accounted for at each tax point (invoice or payment, whichever is earlier). Document the retainer terms clearly to avoid disputes at audit.
How do we record recharges?
Genuine disbursements (you pay as agent and recover at cost, no markup) are treated differently from recharges that are part of your service. Mislabelling the two can lead to under- or over-stated output VAT.
Can small firms elect SBR?
Yes, if the current and all prior tax periods are at AED 3 million revenue or less, the entity is a resident taxable person, and the current period ends on or before 31 December 2026. See the SBR explainer.
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