UAE Oil and Gas VAT 2026: VAT Treatment for Upstream, Midstream, and Downstream
UAE oil and gas VAT guide 2026: crude oil exports zero-rated, oilfield services 5% standard-rated, government concession arrangement VAT, downstream fuel.
UAE oil and gas VAT by segment
| Activity | VAT treatment | Notes |
|---|---|---|
| Crude oil export | Zero-rated | Goods leaving UAE — zero-rated supply |
| Natural gas export (pipeline) | Zero-rated | Export of goods outside UAE — zero-rated |
| Crude oil sold within UAE | 5% VAT | Domestic supply — standard rate |
| Refined petroleum products (domestic) | 5% VAT | Petrol, diesel, jet fuel to UAE customers |
| Drilling services (in UAE) | 5% VAT | Service performed in UAE — standard rate |
| Well integrity and maintenance | 5% VAT | UAE oilfield services — standard rate |
| Engineering / FEED studies | 5% VAT | Professional engineering services in UAE |
| Offshore support vessels (UAE flag) | 5% VAT — seek advice | Complex — depends on location of service |
| Equipment rental (UAE oilfield) | 5% VAT | Plant and equipment hire in UAE |
Government concession and ADNOC VAT
The UAE oil and gas sector is dominated by government entities, particularly ADNOC and its subsidiaries. Government entity VAT treatment is specific:
- ADNOC and Abu Dhabi government entities: Under UAE VAT Executive Regulations, government bodies are subject to VAT for commercial activities but not for sovereign functions. ADNOC’s commercial activities (oil production, gas processing, fuel retail) are subject to standard VAT rules — ADNOC is VAT-registered and accounts for VAT on taxable supplies.
- Supplies to ADNOC: Oilfield service companies supplying drilling, maintenance, or engineering services to ADNOC charge 5% VAT. ADNOC recovers this as input VAT since its activities generate taxable revenue. There is no exemption for supplies to government entities — VAT applies normally.
- Production sharing agreements (PSAs): In PSA structures, the government takes a share of production rather than a cash royalty. The VAT treatment of the government share and the contractor’s share of production requires specific analysis — the FTA has issued guidance on this area.
Input VAT recovery for UAE oil and gas companies
- Oilfield service companies: With predominantly 5% standard-rated and zero-rated (export) revenue — full input VAT recovery on all operating costs: equipment, fuel, professional services, and overheads.
- Capital equipment: Drilling rigs, offshore vessels, and specialist equipment — input VAT on purchases is recoverable if the equipment is used for taxable activities. Capital asset adjustment rules (5-year rule for assets under AED 5 million, 10-year rule for real estate) apply if the equipment’s use changes.
- Cross-border service tax: Oilfield service companies with offshore operations (outside UAE waters) — the place of supply of services performed outside UAE may be outside UAE for VAT purposes. This requires analysis of where the service is physically performed.
UAE oil and gas company or oilfield service provider with VAT questions?
We advise on UAE energy sector VAT — oilfield services, government entity supplies, and export zero-rating. Fixed fee.
See VAT servicesFrequently asked questions
Is UAE petrol (gasoline) subject to VAT?
Yes — petrol (gasoline), diesel, and jet fuel sold to UAE customers are subject to 5% VAT. ENOC, ADNOC Distribution, and other fuel retailers charge 5% VAT at the pump, included in the retail price. The VAT is built into the posted price — consumers do not see a separate VAT line. Commercial customers (trucking, aviation) buying fuel in bulk can recover the input VAT if they are VAT-registered.
Do UAE oilfield service companies need to register for VAT?
If annual taxable turnover from UAE activities exceeds AED 375,000, VAT registration is mandatory. Almost all oilfield service companies (drilling contractors, well services, inspection companies) exceed this threshold. Registration is strongly recommended even below the threshold — to recover input VAT on significant capital equipment and operating costs. Voluntary registration is available from AED 187,500.
How is UAE VAT applied to offshore oil and gas services?
The place of supply for services in UAE VAT generally follows where the service is performed. For offshore services performed outside UAE territorial waters — the place of supply may be outside UAE, potentially making the supply outside the scope of UAE VAT. However, where services are performed partly in UAE waters and partly offshore, the split must be analysed. Seek specialist UAE VAT advice for offshore contracts — this is a complex area with limited FTA public guidance.
Are concession fees paid to the UAE government VAT-exempt?
Concession fees, royalties, and production shares paid to UAE government entities (as part of petroleum concession agreements) are sovereign transactions — not VAT-taxable supplies by the government to the company. These payments are outside the UAE VAT system. The VAT on the company’s own activities (selling oil, providing oilfield services) is governed by the standard UAE VAT rules.
Official UAE Government Sources