What is reverse charge in VAT? The UAE meaning in plain English

Article 48(1) of Federal Decree-Law No. 8 of 2017 says a taxable person who imports concerned goods or services for business purposes is treated as making a taxable supply to itself. For services, Article 30(2) places the supply in the UAE when a foreign supplier with no UAE residence provides it to a business recipient here.

Locally, Article 48(3) applies the reverse charge to supplies of specified hydrocarbons between registrants, and Article 48(8) lets the Cabinet add further cases. The FTA has published public clarifications for additional trades, including metal scrap between UAE registrants.

Most UAE companies use the reverse charge without thinking of it as such. Cloud software billed from Ireland, advertising bought from a platform abroad, a consultant in Mumbai: each creates a reverse-charge entry. On a AED 12,000 subscription, the business records AED 600 of output VAT and, if the subscription is used for taxable work, AED 600 of input VAT.

Leave the entries out and both sides of the return are understated. If part of your business is exempt, the input side is only partly recoverable and the reverse charge becomes a real cost. Article 48(5) of the Executive Regulation also asks you to keep the supplier's invoice and, for goods, the customs statement.

When a bill comes from a supplier outside the UAE, HelloBooks recognises it from the address and currency, converts it to AED and posts both the output and input VAT at 5%. The AI agent asks for confirmation on new foreign suppliers and learns from your answer. If your accountant has set a partial recovery ratio, only the recoverable share goes to the input side. The draft VAT 201 picks up both sides automatically.

Sales you make that are subject to the reverse charge get the invoice wording Article 59(1) of the Executive Regulation requires, stating that the recipient must account for the tax.

Concepts that sit beside the reverse charge.

• Input tax
• Output tax
• Place of supply
• Concerned goods
• Import of services