he Federal Tax Authority (FTA) and UAE authorities have introduced important clarifications affecting VAT treatment in 2025. While the standard VAT rate remains 5%, the FTA’s updated guidance refines when exports can be zero-rated and clarifies VAT treatment inside Designated (free) Zones. This article breaks down the practical points every business owner, finance manager, and tax advisor should know — and the compliance steps you must take to avoid surprises during audits.

1. VAT rate remains 5% — but zero-rating rules tightened

The headline: VAT is still 5%, but the rules for applying the 0% (zero-rating) for exports have been tightened. The FTA’s 2024–2025 amendments and the subsequent Public Clarification make clear that zero-rating for exports (goods and services) is only available when the documentary and substantive conditions are fully met. If required export evidence is missing or incomplete, the FTA can disallow zero-rating and assess VAT and penalties.

What to do:

• Keep a complete export file for each shipment or service (contracts, commercial invoices, shipping docs, customs declarations, proof of recipient outside the UAE, etc.).

• Review existing export transactions and ensure supporting evidence meets the updated list of acceptable documents introduced from the effective date.

2. Export documentation — what the FTA is asking for now

The FTA’s clarifications list specific document combinations that will substantiate zero-rating of exported goods (for example, customs declarations paired with commercial evidence or shipping certificates with official export evidence). These clarifications became effective after the Executive Regulation amendments and are part of Public Clarification VATP040. Failure to maintain acceptable combinations can result in reclassification of supplies.

Practical checklist for goods exports:

• Valid commercial invoice showing export value and recipient outside the UAE.

• Shipping documents (bill of lading, airway bill) and/or customs export declaration.

• For customs-suspension movements, evidence that goods were placed under the applicable suspension regime.