VAT on Imported Services in the UAE: FTA Clarifies Reverse Charge Rules (VATP044)

The UAE Federal Tax Authority (FTA) has issued a new Public Clarification, VATP044, giving clear guidance on how VAT applies to imported services.

With many UAE businesses relying on global service providers for consulting, IT, and software, this update is both timely and important.

What’s the key takeaway?

If you're a VAT-registered business in the UAE receiving services from outside the country, and the place of supply is the UAE, then reverse charge VAT rules apply, unless the service would be exempt if supplied locally.

Here’s what you need to know:

• You’re treated as both the supplier and the recipient
• You must report the output VAT in Box 3 of your VAT return
• A self-issued tax invoice is required, unless:
• You keep the original supplier’s invoice, and
• You meet all the conditions for reverse charge compliance

Can you recover the VAT?

Yes, but only if:

• The service is used to make taxable supplies
• You have complete and valid documentation
• Payment is made (or planned) within six months of the invoice due date

In some sectors, like reinsurance, alternative documentation may be accepted instead of a formal tax invoice.

Why this matters

Misapplying the reverse charge mechanism can lead to:

• VAT underreporting penalties
• Disallowed VAT recovery
• Increased audit risks

This highlights the need for strong internal controls, especially across finance and procurement teams.

Whether you’re a tax professional, financial controller, or business owner, this is a rule worth getting right.