Placement fee revenue recognition for a recruitment agency in the UAE

Under IFRS 15, revenue is recognised when the agency satisfies its promise to the client. For a permanent placement, that promise is usually met when the candidate starts work, not when the offer is signed. Candidates in the UAE often pull out between offer and start, sometimes after a counter-offer or a visa delay, so start date is the safer trigger.

Retained searches are different. If the client pays in instalments for a defined search process, part of the fee may be earned as stages are completed. Read the contract and record the trigger it sets.

A replacement guarantee or partial refund if the hire leaves within a set period makes part of the fee variable. If your history shows that 5% of placements trigger a refund, you can recognise revenue net of a reasonable estimate and hold the rest as a refund liability until the guarantee ends. Agencies with few placements or volatile history may hold back more.

Our view: most small UAE agencies should recognise the full fee on start date and track guarantees in a simple list, provisioning only when a specific candidate is at risk. A complex expected-value model adds work without adding accuracy at small volumes. As volumes grow, revisit this with your auditor.

A candidate accepts an offer on 3 June with an annual package of AED 300,000. Fee: 20%, AED 60,000 plus VAT of AED 3,000. Start date: 1 July. The guarantee is a pro-rata refund if the hire leaves within 90 days.

The agency invoices on start date: debit accounts receivable AED 63,000; credit placement revenue AED 60,000; credit VAT output AED 3,000. The consultant’s commission of AED 9,000 is accrued in July too. If the hire resigns on day 45, the refund under the contract is half the fee, AED 30,000 plus AED 1,500 VAT. The agency issues a tax credit note, reverses AED 30,000 of revenue, and claws back commission if the consultant’s contract allows.

• Offer signed: no entry, note it in the pipeline
• Start date: invoice, revenue and commission accrual
• Guarantee window: monitor, provision only if at risk
• Refund: tax credit note and revenue reversal in that period

Recruitment fees charged to UAE clients are standard-rated at 5%. Fees charged to a client outside the UAE for a role outside the UAE may qualify for zero-rating as an export of services, but conditions apply, and they depend on where the client is and who benefits from the service. Confirm the treatment for each overseas client with a tax agent.

A credit note for a refund must be issued within 14 days of the event that triggers it, under Article 62 of the VAT Decree-Law, and it reduces output tax in the period it is issued.

Tag each placement with the consultant and client as classes. Then profit per consultant and fee income per client fall out of standard reports. The AI agent drafts the invoice when you tell it “invoice Al Noor Holdings for Sara’s placement, start date 1 July, 20% of AED 300,000”, applies VAT, and accrues commission using the rate you set.

When a refund happens, it drafts the credit note and the commission clawback journal for you to approve. Ask “which placements are still inside their guarantee period?” and it lists them from the start dates on the invoices. Agencies wanting their own invoice layout or approval rule for refunds can request it through /book-a-demo.