Many UAE companies today buy software, consultancy, marketing, and design services from abroad. But there’s a catch — even if the foreign supplier doesn’t charge VAT, you still might have to.
The Federal Tax Authority (FTA) recently re-emphasized this in its Public Clarification VATP044, explaining how businesses must account for Output VAT, issue tax invoices, and recover Input VAT on what it calls “Concerned Services” — imported services whose place of supply is the UAE.
In short: when you buy services from abroad, you’re both the supplier and the customer in the VAT eyes — and that means you must self-account for VAT.
Under Article 48(1) of the UAE VAT Law, if a taxable person imports services for business use, they’re treated as making a taxable supply to themselves.
This means:
- You must calculate 5% VAT on the imported service value.
- Record it as Output VAT (Box 3) and simultaneously as Input VAT (Box 10) in your VAT return — provided the expense is for taxable activities.
- You must issue a tax invoice to yourself, unless you retain a valid supplier invoice meeting all requirements or have an administrative exception from the FTA.
There’s no cashflow effect — you don’t actually pay VAT to your supplier, but you must record it correctly in your books and VAT return.
Example 1 – Software Services from India
Tech Global FZCO buys software consulting from an Indian company for AED 20,000.
- The Indian supplier isn’t VAT-registered in the UAE.
- Tech Global must apply reverse charge on AED 20,000 × 5% = AED 1,000.
- Declare AED 1,000 as Output VAT (Box 3) and recover the same as Input VAT (Box 10).
✅ No cashflow impact — but the entry must appear in the return.
DesignLab DMCC buys marketing services from a UK freelancer who only sends a PayPal receipt.
- The company can still declare Output VAT under reverse charge.
- However, to claim Input VAT, they must retain documents showing: supplier name, recipient name, service description, date, amount, and payment proof.
❌ Without these, Input VAT recovery is not allowed.
BuildSmart FZCO receives a design service invoice in July 2025 (AED 50,000) but pays in February 2026.
- Output VAT is reported in July (invoice received = time of supply).
- Input VAT can be claimed in the same return if payment is intended within 6 months of the due date.
⚠️ If payment is delayed beyond 6 months, Input VAT must be reversed until settlement.
EduSmart FZ LLC hires a UK education consultant.
- Only recognized educational institutions offering accredited programs are exempt.
- General consultancy or training services remain taxable.
✅ So EduSmart must apply reverse charge VAT, as the imported service would be taxable in the UAE.
FinEdge Consulting FZCO receives monthly audit reports from a UK firm.
- The FTA accepts that the UAE recipient need not issue a tax invoice to itself if it keeps the supplier’s invoice showing:
- Supplier & recipient details
- Description, value, and date
- Payment terms
- Correct reverse charge VAT must still be declared in the return.
If no such invoice exists, FinEdge can compile documents (contract + emails + proof of payment) or apply for an FTA administrative exception under Article 59(7).
To recover input VAT, a registrant must:
1. Obtain and retain the supplier’s invoice or equivalent document.
2. Account for VAT under reverse charge in the VAT return.
3. Intend to pay the supplier within six months of the agreed due date.
4. Keep sufficient records and proof of payment to show the supply particulars.
✅ Reverse charge = self-accounting for VAT on imported services.
✅ No actual VAT payment to the foreign supplier — just declaration.
✅ Input VAT recovery allowed only if invoice + payment intent within six months.
✅ Supplier invoice can replace self-invoice if all details are present.
✅ No reverse charge if the imported service would have been exempt locally.
At Fastlane, we simplify your VAT compliance — from identifying reverse charge transactions to preparing FTA-ready VAT files and ensuring error-free reporting in Zoho Books, Xero, or QuickBooks.
Whether it’s mapping reverse charge accounts, validating supplier invoices, or ensuring you don’t lose Input VAT due to late payments — we handle it all so you stay compliant and penalty-free.
Talk to us today to review your imported-services transactions and make sure your VAT return is 100% accurate.
