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Introduction

As cross-border services become increasingly common, it’s essential for UAE-based businesses to understand how Value Added Tax (VAT) applies when receiving services from suppliers located outside the UAE. The Federal Tax Authority (FTA) has issued a Public Clarification to shed light on how to handle Concerned Services—that is, services received from abroad that are taxable if supplied within the UAE.

In this blog, we explore the obligations of VAT-registered persons regarding:

• Accounting for Output Tax
• Issuing Tax Invoices
• Recovering Input Tax

What Are “Concerned Services”?

Concerned Services refer to services imported from outside the UAE where the place of supply is considered to be within the UAE under VAT law. These are typically professional, advisory, or digital services—unless they would be VAT-exempt if supplied locally.

If you’re a VAT-registered business (a Registrant) in the UAE receiving such services, you are considered to be making a taxable supply to yourself under the reverse charge mechanism.

Output Tax: Your Obligation to Self-Account

When you receive Concerned Services, you must account for Output Tax as if you supplied the services to yourself. This Output Tax is reported in Box 3 of your VAT return for the relevant tax period.

Key Rule: You are responsible for calculating and reporting VAT on the value of the imported service—even though the supplier is located outside the UAE.

Issuing a Tax Invoice to Yourself

Under UAE VAT Law, any Registrant making a taxable supply must issue a valid Tax Invoice within 14 days of the supply. That includes self-supplied Concerned Services under the reverse charge mechanism.

However, the FTA allows an administrative exception:
If you retain the invoice issued by the foreign supplier, and that invoice:

• Includes the necessary details (names, addresses, date, description, consideration),
• Reflects the full value and nature of the service, and
• You account for the Output Tax correctly in your VAT return,

Then you are not required to issue a separate Tax Invoice to yourself.

In special cases (e.g., reinsurance), if no invoice is issued, a combination of documents showing the above details may suffice.

Input Tax Recovery: Can You Claim VAT on These Services?

Yes, you can—but only if certain conditions are met. You may recover the Input Tax on Concerned Services only if:

The services are used to make taxable supplies;
You are VAT registered in the UAE;
You retain proper documentation, including the invoice issued by the overseas supplier;
You have paid or intend to pay the supplier within six months of the agreed payment date.

Timing: Input Tax can be recovered in the tax period in which you receive the invoice and make the payment, or in the immediately following tax period.

Documentation Checklist

To remain compliant and eligible for Input Tax recovery, ensure you retain:

• Invoice from the foreign supplier
• Evidence of payment (or intent to pay)
• VAT return entries (including Output Tax under reverse charge)
• Any additional correspondence or agreements

Important Considerations

• If the service would be exempt from VAT had it been supplied in the UAE (e.g., some financial or educational services), no Output Tax or Input Tax applies.
• If the supplier fails to issue an invoice and you don’t have sufficient documentation, you must request an administrative exception from the FTA.
• Failing to self-account for VAT on imported services may lead to penalties and disallowance of Input Tax.

Conclusion

Understanding the reverse charge mechanism and related documentation requirements is crucial for VAT-registered businesses importing services into the UAE. By proactively issuing (or retaining) proper invoices and accounting for Output Tax, businesses can legally recover Input Tax and remain fully compliant with the UAE VAT framework.

For tailored guidance on VAT compliance, reverse charge accounting, or preparing your VAT returns, feel free to contact our VAT advisory team.

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