Background
Federal Decree-Law No. (8) of 2017 implementing VAT in the UAE ("UAE VAT Law"), defines Concerned Services as "Services that have been imported, where the place of supply is in the State, and would not be exempt if supplied in the State".
In accordance with article 48(1) of the UAE VAT Law, Taxable Persons importing Concerned Services, which have a place of supply in the UAE, are regarded as making Taxable Supplies to themselves provided the Concerned Services would not have been exempt should they been supplied in the UAE. Article 48 of the UAE VAT Executive Regulations (Cabinet Decision No. 52 of 2017 and its amendments), further provides details on how the Reverse Charge Mechanism should be applied by a Taxable Persons importing Concerned Services from outside the UAE.
In more details
The public clarification addresses common issues encountered by Taxable Persons importing Concerned Services from outside the UAE in relation to the three components of the Reverse Charge Mechanism:
- The obligation to account for Output Tax;
- The issuance of Tax Invoices; and
- The recovery of Input Tax.
Accounting for Output Tax
The public clarification reaffirm the principle set out in Article 48(1) of the UAE VAT Law under which a Taxable Person should be treated as making a Taxable Supply to itself in the case it is importing Concerned Services from outside the UAE. The public clarification provides that in such scenario, the Taxable Person shall be responsible to account for the due Tax resulting from the Services received and report the value of such Tax in Box 3 (i.e., section corresponding to the Supplies subject to the reverse charge provisions) of its VAT Return for the relevant Tax Period.
Issuing Tax Invoices
According to the FTA's previous clarification, a Taxable Person importing Concerned Goods into the UAE shall be viewed as falling under the general obligation of issuing a Tax Invoice to the Recipient of the Services within 14 days of making the Taxable Supply. Therefore, such Person would be required to issue a full Tax Invoice to itself, and retain it as part of its audit file, in respect of each Concerned Services received. This position has previously been clarified in the Public Clarification VATP040 published in March 2025 (our update available here).
However, this new public clarification confirms the FTA's latest position that it would accept – as an administrative exception to the general rule (under Article 59(7) of the UAE VAT Executive Regulations) that the Taxable Person does not issue Tax Invoice to itself if it obtains and retains the invoice issued by the overseas supplier (reflecting the details of Concerned Service received, including the Consideration paid), provided that the Taxable Person accounts for the correct VAT amount under the reverse charge mechanism.
Additionally, this public clarification outlines that, in exceptional circumstances, a document (or combination of documents) may be considered as an invoice issued by the overseas supplier, if they contain at least the following information:
- Name and address of the overseas supplier;
- Name and address of the UAE recipient;
- Date of issuance of the document;
- Date the Service ended;
- Description of the Service supplied; and
- Consideration received as well as the details pertaining to the currency, and payment terms.
Recovering Input Tax
In accordance with the clarification, where a Taxable Person has not issued a Tax Invoice to itself in respect with the Concerned Services imported from outside the UAE, it would be eligible to recover the Input Tax incurred provided it retains the invoice (or document(s) regarded as an invoice) of the overseas supplier.
