VAT on Exports to Saudi Arabia from UAE

The UAE and Saudi Arabia have a strong trade partnership, with billions of dirhams worth of goods and services exchanged every year. In fact, Saudi Arabia is one of the UAE’s top trading partners, with trade between the two countries reaching over AED 136 billion in recent years. With such a high volume of trade, understanding VAT on Exports to Saudi Arabia from UAE is crucial for businesses to ensure smooth operations and compliance.

If you’re exporting goods or services to Saudi Arabia, you may need to charge VAT, or, in some cases, you might be eligible for zero-rated VAT (0%), which means you don’t have to charge tax. However, there are specific conditions you must meet to qualify. Understanding these rules can help you avoid mistakes, penalties, or delays in shipments.

Let us make it easier for you, we’ll break down everything you need to know about VAT on Exports to Saudi Arabia from UAE, including when VAT applies, how to qualify for zero-rated VAT, required documents, and how businesses can stay compliant.

VAT on Exports from UAE

VAT (Value-Added Tax) is a consumption tax applied at each stage of the supply chain. It is charged on the sale of goods and services and ultimately paid by the end consumer.

The UAE introduced VAT in 2018 at a standard rate of 5% as part of the GCC VAT Agreement, a unified tax system followed by Gulf Cooperation Council (GCC) countries, including Saudi Arabia. This means VAT regulations in the UAE and Saudi Arabia are closely aligned, ensuring smoother trade between the two nations. However, there are specific conditions under which VAT is applied or exempted when exporting.

VAT on Exports to Saudi Arabia from UAE

Understanding VAT rules for direct and indirect exports is essential for UAE businesses exporting to Saudi Arabia.

1. Direct Export

A direct export occurs when goods are shipped directly from the UAE to a foreign destination, including Saudi Arabia, by the UAE supplier or a designated shipping agent.

VAT Treatment for Direct Exports:

• Direct exports are subject to zero-rated VAT (0%).
• The goods physically leave the UAE within 90 days from the date of supply.
• The UAE exporter has valid customs documentation proving the export.
• The buyer (Saudi recipient) receives the goods outside the UAE.

2. Indirect Export

An indirect export occurs when the overseas buyer (Saudi company or individual) arranges the shipment of goods themselves, rather than the UAE supplier handling transportation.

VAT Treatment for Indirect Exports:

• Indirect exports may qualify for zero-rated VAT (0%), but stricter documentation requirements apply.
• The goods must still leave the UAE within 90 days.
• The UAE supplier must keep proof that the goods were exported, even though the buyer handled the shipping.

VAT Categories for Exports

When exporting from the UAE to Saudi Arabia, VAT can be classified into two main categories:

1. Zero-Rated Exports (0% VAT)

• Exports that meet certain conditions can be taxed at 0%, meaning businesses do not need to charge VAT to their Saudi customers.
• To qualify for zero-rated VAT, businesses must provide proof of export, such as shipping documents and customs clearance papers.

2. Standard-Rated Exports (5% VAT)

• In some cases, exports may be subject to the standard 5% VAT, particularly if certain conditions for zero-rating are not met.
• This applies mainly when the exporter fails to provide proper documentation or if the transaction does not meet the UAE Federal Tax Authority’s (FTA) criteria for zero-rating.

VAT Treatment for Exports to Saudi Arabia from UAE

VAT treatment varies depending on whether you are exporting goods or services and whether the recipient is a business or an individual.

1. Goods Exported from UAE to Saudi Arabia

When is VAT Zero-Rated (0%)?

Goods exported from the UAE to Saudi Arabia are generally subject to zero-rated VAT (0%) if the following conditions are met:

• The goods physically leave the UAE and are exported to Saudi Arabia.
• The exporter provides proof of shipment and customs clearance.
• The transaction complies with UAE Federal Tax Authority (FTA) guidelines.

When is VAT Applicable (5%)?

In some cases, VAT at 5% is applied to exports, including:

• If the exporter fails to provide valid proof of export.
• If the goods do not leave the UAE within the required timeframe.
• If the export does not comply with FTA documentation rules.

Documentation Requirements for Zero-Rated VAT

To qualify for 0% VAT, businesses must maintain proper records, including:

• Customs export declaration as proof of export.
• Commercial invoice stating that the goods are for export.
• Airway bill, bill of lading, or transport documents as evidence of shipment.
• Proof of payment from the Saudi Arabian buyer.

2. Services Provided to Saudi Arabia

How VAT Applies to Cross-Border Services

The VAT on export of services to Saudi Arabia from UAE depends on:

• The location of the recipient.
• Whether the recipient is a business (B2B) or an individual consumer (B2C).

B2B Transactions (Business-to-Business)

• If the Saudi Arabian customer is a registered business with a valid VAT number, the reverse charge mechanism (RCM) applies.

• Under RCM, the UAE service provider does not charge VAT, and the Saudi business is responsible for self-assessing and paying VAT in Saudi Arabia.

• This applies to services such as consulting, legal, IT, and professional services.

B2C Transactions (Business-to-Consumer)

• If services are provided to an individual consumer in Saudi Arabia, UAE businesses must charge 5% VAT on the invoice.
• This applies to services like online training, digital services, and personal consulting.

Conditions for Zero-Rated VAT on Exports to Saudi Arabia

To qualify for zero-rated VAT (0%) when exporting goods from the UAE to Saudi Arabia, businesses must meet specific conditions set by the UAE Federal Tax Authority (FTA).

1. Proof of Export

To benefit from the 0% VAT rate, businesses must provide valid proof that the goods have left the UAE. This includes:

• Customs Export Declaration
• Airway Bill / Bill of Lading
• Shipping Invoice
• Import Customs Documentation from Saudi Arabia

2. Compliance with UAE Federal Tax Authority (FTA) Regulations

The FTA has specific rules that businesses must follow for zero-rated VAT treatment:

• The goods must physically leave the UAE within 90 days from the date of supply.
• The exporter must maintain documentary proof of export and receipt of goods by the Saudi buyer.
• The transaction should be conducted with a valid VAT-registered business in Saudi Arabia, if applicable.

3. Invoice and Record-Keeping Requirements

Proper invoicing and record-keeping are essential for tax compliance:

• Tax Invoice: Must clearly state that the supply is an export and is subject to 0% VAT.
• Buyer Details: Include the Saudi company’s name, address, and VAT registration number (if applicable).
• Payment Records: Maintain proof of payment from the buyer.
• Audit Trail: All relevant documents must be stored for at least five years as per UAE VAT laws.

VAT Reverse Charge Mechanism for Saudi Arabian Importers

The Reverse Charge Mechanism (RCM) is an essential VAT concept for businesses engaged in cross-border trade within the Gulf Cooperation Council (GCC). It allows Saudi Arabian businesses importing goods and services from the UAE to handle VAT differently.

1. How the Reverse Charge Mechanism (RCM) Applies

• Normally, suppliers charge VAT and remit it to the tax authorities.
• Under RCM, UAE exporters do not charge VAT on the invoice.
• Instead, the Saudi importer self-assesses and pays VAT to the Zakat, Tax and Customs Authority (ZATCA) in Saudi Arabia.
• This mechanism applies only when the Saudi importer is VAT-registered.

2. Impact on Saudi Businesses Importing from UAE

• No upfront VAT payment to UAE suppliers.
• Simplifies cross-border trade within GCC countries.
• Ensures compliance with Saudi VAT laws, preventing double taxation.
• Requires proper documentation (import declarations, invoices, and proof of VAT self-assessment).

3. VAT Obligations for Saudi Importers

• Self-account for VAT at the applicable Saudi rate (currently 15%).
• Declare and pay VAT on their next VAT return to ZATCA.
• Maintain accurate records of imports, invoices, and tax filings.

How Shuraa Tax Can Help

Understanding VAT on Exports to Saudi Arabia from UAE is key to smooth cross-border trade. Exporters must know when VAT is zero-rated, when it applies, and how the Reverse Charge Mechanism impacts Saudi importers. Proper documentation, compliance with UAE Federal Tax Authority (FTA) regulations, and accurate VAT filings are essential to avoid penalties and delays.

Keeping up with tax laws can be complicated, but the Shuraa Tax makes it easy. Our team of VAT experts helps businesses with VAT registration, compliance, and filing while ensuring all export-related VAT obligations are met. We also provide expert guidance on UAE-Saudi VAT laws, helping businesses focus on growth without tax worries.

Contact us today for expert VAT solutions and seamless exports.

📞 Call: +(971) 44081900  

💬 WhatsApp: +(971) 508912062 

📧 Email: info@shuraatax.com 

Frequently Asked Questions

1. What is VAT on Exports to Saudi Arabia from UAE?

VAT is a 5% tax on goods and services, but exports to Saudi Arabia are generally qualified for zero-rated VAT (0%) if they meet certain conditions.

2. Are there any exemptions for VAT on exports to Saudi Arabia from UAE?

Yes, exports to Saudi Arabia can be zero-rated (0% VAT) if proper documentation proves the goods have left the UAE within 90 days.

3. How does the Reverse Charge Mechanism work for Saudi importers?

Under this mechanism, the Saudi importer accounts for VAT instead of the UAE exporter, reducing tax payment burdens for UAE businesses.

4. Does VAT apply to services provided to Saudi clients?

It depends on whether the service is B2B or B2C, some cross-border services are subject to zero-rated VAT, while others may be taxed.

5. What documents are required for zero-rated VAT on exports to Saudi Arabia?

Essential documents include customs export declarations, airway bills, invoices, and proof of payment to validate the export process.