I run a consultancy firm with clients outside the UAE — how do Corporate Tax and VAT actually apply to me?

Consultancy and professional services firms deal with more overlap between Corporate Tax and VAT than most businesses, because a meaningful share of their revenue comes from cross-border engagements, and another share is expenses the firm pays out and then recharges to the client. Those two points are exactly where the confusion tends to happen.

On the Corporate Tax side, the standard rate is 9% on taxable income above AED 375,000 a year. If your firm is licensed in a free zone and hoping to benefit from the 0% Qualifying Free Zone Person rate, be aware that income from consulting services delivered to mainland clients is generally classified as non-qualifying income and doesn't get the 0% treatment — even though the firm itself is properly licensed in the free zone. That's a common trap for consultancies operating out of a free zone whose main clients are actually on the mainland.

On the VAT side, the basic rule is that the place of supply for a service to a business customer (B2B) follows where that customer is established. So if the client is a genuine business outside the UAE and the GCC with no fixed establishment in the country, the consulting service can potentially be zero-rated as an export of services — provided the service isn't connected to UAE real estate, and isn't "effectively used and enjoyed" inside the UAE at the time it's supplied. That means if the consulting engagement is actually about a UAE matter and its effects play out here, the position can differ even though the invoice goes to a client abroad.

Going the other direction, if your firm receives a consulting service from a foreign advisor not registered in the UAE, you need to self-account for VAT under the reverse charge mechanism — recording it as both output tax and input tax on the same return.

As for expenses recharged to the client — flights, hotels, transport during an engagement — this is one of the most commonly mishandled areas for consultancies. The tax authority distinguishes between a disbursement (a cost paid as an agent on the client's behalf, where the original invoice is in the client's own name and there's no markup) which stays outside VAT scope, and a reimbursement (a cost that was really the consultant's own cost of doing business, recharged as part of the fee) which carries the same VAT rate as the underlying service — even if the original expense itself was VAT-exempt, like a flight ticket. The common mistake is recharging expenses "at cost" and assuming that automatically puts them outside VAT, without checking whether every condition for a genuine disbursement is actually met.

At RASEEKH, we review how consultancy firms structure their contracts so income is classified correctly for Corporate Tax, and every cross-border engagement and recharged expense is treated correctly for VAT — before it turns into a surprise difference on the return.