What is the reverse charge mechanism in UAE VAT?
For imports or services from non-residents, the UAE buyer accounts for VAT (both input and output) in their return, neutralizing cash flow impact. This applies to goods imports or services like legal advice from abroad.
The reverse charge mechanism is a special VAT procedure used for specific transactions in the UAE.
When Reverse Charge Applies
- Imports of goods into the UAE
- Services received from non-UAE suppliers
- Certain domestic transactions (construction, telecommunications)
- Digital services from abroad
How It Works
- UAE recipient accounts for VAT instead of supplier
- Same amount treated as both input and output VAT
- Typically results in neutral cash flow impact
- Reported in VAT return by recipient
Examples
- Legal services from UK law firm
- Consulting services from US company
- Software licenses from European suppliers
- Goods imported from non-GCC countries
Benefits
- Simplifies cross-border transactions
- Reduces compliance burden on foreign suppliers
- Ensures VAT collection on imports
- Maintains level playing field for domestic suppliers
