How is VAT charged on services bought from abroad by a UAE business?
Through the reverse charge. Article 48 of the VAT Decree-Law treats a taxable person importing concerned goods or services for its business as making a taxable supply to itself, responsible for accounting for the VAT. The UAE business declares the output VAT and, where recoverable, the same amount as input VAT in the same return.
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Common construction examples
Design or engineering services from a foreign consultant, software subscriptions billed from abroad, and specialist inspection services from overseas firms. The foreign supplier charges no UAE VAT, and the contractor accounts for it.
Net effect
For a fully taxable contractor, the VAT declared and the VAT recovered cancel out in the same return, so there is no cash cost. A business with exempt supplies may not recover all of it.
How SupaJack Construct helps
In SupaJack Construct each bill line records its VAT type, and a line marked reverse charge goes to Box 3 with the same VAT recovered in Box 10. A bill for goods cleared through customs is marked as a customs import with the import VAT paid, and goes to Box 6 instead. Only older bill lines with no recorded type are estimated from the supplier's country, and those figures are flagged for the finance team to check.
Related tools and guides
See the VAT guide for contractors, the VAT calculator, the payment certificate calculator, the retention calculator, finance and VAT in SupaJack Construct, the answer on whether a payment certificate triggers VAT and the meaning of e-invoicing.
Worked example
A contractor pays a UK structural consultant GBP 20,000 for design review, worth AED 93,000. It declares AED 4,650 of output VAT under the reverse charge and recovers AED 4,650 as input VAT in the same return. The net VAT is zero.
Questions people ask
Does the foreign supplier charge UAE VAT?
No. The UAE business accounts for it.
Is there a cash cost?
Not for a fully taxable business that can recover it.
Which article applies?
Article 48 of the VAT Decree-Law.