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FTA issues Public Clarification on Concerned Services -
Accounting for Output Tax, issuing Tax invoices, and Input Tax
recovery.
The Federal Tax Authority (FTA) recently issued Public
Clarification under UAE VAT law that discuss the VAT treatment on
Concerned Services - Accounting for Output Tax, issuing Tax
invoices, and Input Tax recovery. We have summarized below the key
UAE VAT positions discussed in the Public Clarification:
Public Clarification (VATP044) clarifies the need to
account for Output Tax and issue Tax invoices with respect to
Concerned Services and the documents essential for recovering Input
Tax regarding these Services.
Sr. No.
Topic
Comments
1
Coverage of VATP044
Concerned Services (Imported) received from Outside UAE where
the Place of supply is in UAE.
VAT registered businesses in the UAE receiving such services
are deemed to have such supplied these services to themselves and
must account for output VAT using the Reverse Charge Mechanism
(RCM).
Registrant must issue self-invoice for accounting and paying
VAT.
2
VAT Treatment
This is where the recipient of imported service account for the
VAT applies Reverse charge mechanism by issuing self-invoice.
This ensures fair tax treatment for services consumed in UAE,
even when supplied by vendor located outside UAE who has not
obtained VAT registration in UAE.
3
Issuing Tax Invoices
Registrant must issue a tax invoice to themselves within 14
days from the date of supply.
No need to issue self-invoice when overseas supplier has issued
invoice with the details of:
Supplier & Recipient details
Date of issuance of document and date when service provision
ended
Description and consideration
Payment terms, if applicable
4
Input VAT Recovery
The service was acquired for taxable business use.
Registrant must pay the supplier within 6 months from the date
of issued invoice. Timely payment to supplier avoids losing the
right to reclaim VAT.
Input VAT can be recovered in First tax period of
receipt/payment or the immediate tax period. The detailed
clarification is provided in VAT Public Clarification Timeframe for
recovering input tax
(VATP017)
5
Documents Retention
Emphasis proper documents such us- valid invoices, payment
proof and any other related document like vendor agreement helps
ensure a smooth audit process and reduce the risk of
penalties.
Our Comments
The said Public Clarification gives clear guidance on VAT for
imported services. It highlights the need for proper documents,
on-time payments, and using the reverse charge correctly.
Businesses should review their processes to stay compliant and
recover VAT effectively.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
