Reverse charge on foreign software subscriptions and other imported services

When a non-resident supplier sells services to a UAE business, the supplier is not registered here and does not charge UAE VAT. Article 48 of the VAT Decree-Law places the obligation on the UAE recipient instead: the registered business calculates the VAT, reports it as output tax and, if the service is used for taxable supplies, recovers it as input tax in the same return.

For a fully taxable business the two entries cancel out. The point of the mechanism is that a UAE business buying from abroad is treated the same as one buying from a UAE supplier, and that businesses with exempt activities cannot avoid VAT by importing services.

A Dubai marketing agency pays, in one quarter, USD 3,000 for design software, EUR 2,000 for a European video freelancer and the equivalent of AED 18,000 for advertising billed by a non-resident platform. Converted at the rates used for VAT, say these total AED 36,000. VAT at 5% is AED 1,800.

On the VAT 201, AED 36,000 and AED 1,800 go in Box 3 as supplies subject to the reverse charge. The same AED 1,800 goes in Box 10 as recoverable input tax. Net effect: zero. If the agency forgot the reverse charge, its net VAT would be the same, but its return would be incorrect, and the AED 36,000 would also be missing from its taxable imports, which matters for anyone near the registration threshold.

The reverse charge becomes a real cost when the business cannot recover all its input tax. A clinic making zero-rated healthcare and some exempt or standard-rated supplies, a property company letting residential units or a bank with exempt financial services will report the full output tax in Box 3 but recover only part of it. For them, overseas software is 5% more expensive than it looks, and missing the reverse charge means underpaid tax with penalties.

Federal Decree-Laws No. 16 and 17 of 2025 amended Article 48 to clarify that businesses do not have to issue self-invoices for imported goods or services under the reverse charge. Supporting documents still matter, and a self-invoice may still help support recovery where supplier documents are poor. The same amendments tightened supplier verification duties, which apply to reverse charge transactions as much as any other.

Before each return, run through these.

• List every bill from a supplier with no UAE TRN and a foreign address.
• Confirm the service is received in the UAE by your business, not by an overseas branch.
• Convert foreign currency amounts to AED at an acceptable rate and keep the rate used.
• Post output tax and input tax, and check that Box 3 and Box 10 agree for a fully taxable business.
• For card-paid subscriptions, download the monthly invoice, not just the card statement line.

When the AI reads a bill from a foreign supplier with no UAE VAT, it suggests the reverse charge treatment for that line and posts both sides automatically once you approve. Card subscriptions spotted on uploaded bank statements without a matching bill are flagged so someone downloads the invoice. FX conversion uses the rate recorded on the transaction. The VAT 201 draft then fills Box 3 and Box 10, and a reviewer can click through to every underlying bill before filing on EmaraTax.