Many businesses in the UAE receive services from abroad. What they don’t always know is that these services can trigger VAT obligations. A common mistake is failing to account for VAT, not issuing the right invoices, or missing out on valid input tax claims.
This blog explains how businesses should handle VAT when it comes to imported services, according to a new FTA update. It covers how to account for output tax, when and how to issue tax invoices, and how to recover input tax correctly.
VAT consultants in the UAE, i.e., Tax Gian, help you stay up to date with the dynamic tax environment of the UAE, allowing you to remain compliant with the tax laws and run your businesses smoothly.
What Are “Concerned Services”?
Concerned Services are services received from outside the UAE. These are considered taxable in the UAE unless the services would be exempt had been supplied in the UAE. The place of supply for these services is inside the UAE, so local VAT rules apply; even though the service comes from a foreign supplier.
Who Needs to Act?
If you’re a registered business in the UAE and you receive a Concerned Service, you’re responsible for handling the VAT. This includes calculating and reporting the output tax and keeping proper documentation.
You can ask tax consultants in Dubai as per your specific business circumstances.
How to Account for Output Tax?
When a business imports a Concerned Service, it’s treated as if it supplied the service to itself. This is known as the reverse charge mechanism. You don’t charge VAT to anyone else; you simply calculate VAT on the value of the service and report it in your VAT return.
You must report this under Box 3 of your VAT return for the period when the service was received.
Issuing Tax Invoices to Yourself
Yes, that’s correct. Under standard rules, when you receive a Concerned Service, you’re supposed to issue a tax invoice to yourself. This should be done within 14 days from the date of supply.
However, there is a practical exception.
If the overseas supplier issued an invoice that includes:
- Supplier’s name and address
- Your business name and address
- Date of the invoice
- Description of the service
- Total price and currency
If you’re accounting for the correct VAT amount, then you don’t need to create a separate tax invoice for yourself. The original supplier’s invoice will be enough, as long as you keep it properly.
But if there is no such invoice or supporting documents, then you must either issue one yourself or apply for an administrative exception from the FTA. For more information on this, consult VAT services in the UAE.
What If There’s No Invoice at All?
Some services, like reinsurance, may not always come with a formal invoice. In these cases, a combination of documents showing the key details (such as name, service description, amount, and dates) can be used as proof.
Still, you must retain these records and make sure they meet the requirements. Otherwise, you may have to issue your own tax invoice or apply for an exception under Article 59(7) of the Executive Regulation.
Recovering Input Tax
If you’re using the Concerned Service for business purposes that involve taxable supplies, you may be able to recover the input VAT.
To do that, you must:
- Be a registered VAT entity
- Have paid (or intend to pay) the supplier within six months of the agreed date
- Have the invoice or valid documents proving the transaction
- Ensure the service is related to taxable business activities
You can claim the input tax in the same tax period in which you received the invoice, or in the next tax period.
Even if you didn’t issue a tax invoice to yourself, as long as the supplier’s invoice is complete and you meet the above conditions, you can still claim the input tax. Get clearer insights from VAT consultants in the UAE.
Keep Your Records Safe
Input tax recovery depends heavily on documentation. You must store:
- Supplier invoices
- Payment records
- Proof that the service supports taxable activities
No records, no refund. That’s the simple rule.
Know Your VAT Duties
The Federal Tax Authority (FTA) does not allow shortcuts. If you import Concerned Services:
- You must treat them as taxable
- You are responsible for accounting for VAT, not the supplier
- You need to document everything properly
Missing even one of these steps can lead to errors in your VAT return and can affect your ability to recover VAT later.
How can Tax Gian Assist?
VAT on imported services isn’t optional. If your business deals with foreign service providers, it’s your job to handle the VAT in the UAE. All of this is easy when you have the proper support of VAT consultants in Dubai, like Tax Gian. We help you manage your tax liabilities smoothly without a chance of mistake. Our highly qualified professionals help you better deal with the authorities and comply with the regulations.
