Place of Supply Rules for Manufacturing in the UAE

Goods are supplied where they are when the supply takes place. A sale completed in the UAE is a UAE supply at 5%; goods that leave the UAE with proper evidence are zero-rated exports. For factories, processors, assemblers and industrial producers, the goods analysis is usually the easy half: stock in a UAE warehouse sold to a UAE customer is a UAE supply at 5%, and stock shipped abroad with evidence is a zero-rated export under Article 45(1). Build the analysis into order processing: the delivery address and the shipping documents decide the treatment before the invoice is raised, not after.

Manufactured goods are supplied where they are when the supply takes place. Contract manufacturing and tolling add the services layer: work performed on goods in the UAE is a UAE supply of services, and installation and commissioning follow the goods or the site depending on the contract structure. The general rule for services looks to where the supplier is established, with specific rules for land-related services, transport, and other categories. Cross-border services then face the exported-services conditions for zero-rating: the recipient outside the UAE and the Implementing States, and consumption outside the UAE, among the Regulation's requirements.

The table applies the rules to the sector's typical transactions. Each scenario turns on where the goods are or where the service is performed or consumed, not on where the invoice is sent.

Place of supply decides three things at once: whether UAE VAT applies at all, which rate applies, and whether the supplier needs to consider registration. A supply placed outside the UAE is outside the scope of UAE VAT; a supply placed in the UAE is standard-rated unless a zero-rating or exemption applies. For factories, processors, assemblers and industrial producers selling across borders, the analysis must happen before the contract is priced, because the VAT treatment is part of the price. A 5% supply quoted as an export loses margin; an export quoted with VAT loses the bid. Settle the place of supply in the proposal, not in the finance review.

The file should evidence where the goods were or where the service was performed or consumed: delivery notes, contracts specifying the place of performance, customer location evidence, and for exports the customs and shipping documents. VAT records must generally be kept for five years after the end of the tax period they relate to, and longer for specific categories such as real estate records. Invoices, contracts, import and export evidence, and the workings behind apportionment all sit inside that file.

Where goods move through several hands or services involve intermediaries, each supply is placed on its own facts: the agent's supply to its principal, the principal's supply to the customer, and any disbursements are each judged separately. For factories, processors, assemblers and industrial producers, back-to-back and drop-shipment arrangements need every leg mapped before invoicing, because a single blended invoice across two places of supply misstates at least one of them.

Cross-border supplies are where two tax authorities can both claim the tax or neither does. For factories, processors, assemblers and industrial producers, the protection is contractual: engagement letters and sale contracts should state where the goods are, where the service is performed, and where it is consumed, before the supply happens. Where a customer asserts a different place of supply, get it in writing and test it against the legislation rather than accepting the customer's VAT position at face value.