My client is based in the UK and has a client in the United Arab Emirates (UAE) to whom she supplies graphic design services. My client recently became VAT registered and we contacted HMRC at the time to confirm whether UK VAT would be payable on the services to UAE. HMRC informed us that the place of supply for this business customer was where they belonged, i.e. in the UAE, and therefore UK VAT did not have to be charged as it was outside the scope of UK VAT. A 5% VAT has now been implemented in UAE since 1 January 2018, and there seems to be confusion over what my client should now be invoicing. They have asked her to prepare two invoices whilst they figure out how to account for their VAT; one invoice with 5% VAT and one without. If for example my client is expecting to receive £10,000, should she invoice for just £10,000 or £10,000 plus 5% VAT? I am presuming she should add the 5% if she wants to pocket the full amount originally quoted?

Arthur Weller replies:
VAT Notice 741A section 6.3 says that the place of supply for a business to business (B2B) supply is where the customer belongs, as you have written. If you look at section 2.1, it states that where the place of supply of services is outside the EU, then that supply is not liable to both UK and EU VAT. However, the UAE have just started applying VAT. If you look at www.mof.gov.ae/En/Budget/Pages/VATQuestions.aspx at section 2.29 you can see about, as a non-resident, registering for VAT in the UAE. It states: 'Non-residents that make taxable supplies in the UAE will be required to register for VAT unless there is any other UAE resident person who is responsible for accounting for VAT on these supplies. This exclusion may apply, for example, where a UAE business is required to account for VAT under a reverse charge mechanism in respect of a purchase from a non-resident.'