Issue

Taxable Persons receiving Services from outside the UAE while the place of supply of such Services is in the UAE, are required to account for VAT on these Concerned Services, unless the Services would be exempt had they been supplied in the UAE.

This Public Clarification clarifies the requirement to account for the Output Tax and issue Tax Invoices in respect of Concerned Services and the documentary requirements for recovering Input Tax in respect of these Services.

Summary

Taxable Persons that Import Concerned Services from outside the UAE, which have a place of supply in the UAE, are regarded as making Taxable Supplies to themselves, unless the Services would be exempt had they been supplied in the UAE.

A Registrant receiving the Concerned Service ('Recipient') is required to account for Output Tax in respect of the Concerned Service and to issue a Tax Invoice to itself, unless the Recipient obtained an administrative exception from the FTA allowing them not to issue a Tax Invoice.

A Recipient may recover the related Input Tax to the extent the Concerned Service was acquired to make Taxable Supplies, provided the Recipient is registered for VAT and obtains and retains the relevant supporting documents, e.g. the supplier's invoice.

Detailed analysis

General

In this clarification, Federal Decree-Law No. 8 of 2017 on Value Added Tax and its amendments is referred to as 'Decree-Law' and Cabinet Decision No. 52 of 2017 on the Executive Regulation of the Federal Decree-Law No. 8 of 2017 on Value Added Tax, and its amendments, is referred to as 'Executive Regulation'.

A Registrant^[1] making Taxable Supplies is required to report the VAT imposed on the supply and issue an original Tax Invoice within 14 days from the date of supply.^[2]

A Registrant is only entitled to recover the related Input Tax when all the relevant requirements are met, including the retention of the relevant supporting documents.

These distinct matters are addressed in more detail below.

Obligation to account for Output Tax

Taxable Persons often receive Services from outside the UAE. Where the place of supply of these services is in the UAE, such imported Services constitute Concerned Services, provided they would not be exempt from VAT had they been supplied in the UAE.^[1]

The Taxable Person is regarded as making a Taxable Supply to itself when it imports a Concerned Service.^[3] Consequently, the Taxable Person is responsible to account for the Due Tax^[1] on the Service received, and report the value and related Output Tax in Box 3 of its VAT return for the Tax Period during which the date of supply of the Concerned Service crystallises.

Issuing tax invoices

Registrants are required to issue and deliver an original Tax Invoice to the Recipient of Services within 14 days of making a Taxable Supply.^[4][G1]

Since the Registrant is regarded as supplying the Concerned Service to itself, it is required to issue and deliver a valid Tax Invoice to itself in respect of each Concerned Service received.

Article 59(7)(b) of the Executive Regulation provides that, where there are (or will be) sufficient records available to establish the particulars of any supply or class of supplies, and that it would be impractical to require the issuance and/or delivery of a Tax Invoice by the Registrant, the FTA may determine that a Tax Invoice is not required to be issued in certain cases.^[5][G2]

Considering the administrative burden to issue Tax Invoices to itself in the case of Concerned Services, the FTA accepts that the Recipient is not required to issue a Tax Invoice to itself in respect of Concerned Services if it obtains and retains the invoice issued by the overseas supplier reflecting the details and the Consideration paid for the Concerned Service, provided that the Recipient accounts for the correct VAT amount under the reverse charge mechanism in respect thereof and retains sufficient information to establish the particulars of such supplies.

In exceptional cases, if the supplier did not issue an invoice, e.g. in the case of reinsurance services, a document (or a combination thereof) that reflects at least the following particulars would be regarded as the supplier's invoice:

• the name and address of the supplier of the Concerned Service, e.g. a foreign entity supplying the Service from outside the UAE,

• the name and address of the Recipient,

• the date the document was issued,

• the date the Service ended,

• description of the Service supplied,

• Consideration for the supply, including the relevant currency and, where applicable, payment terms.

The above administrative exception does not apply in instances where the overseas supplier does not issue an invoice or combination of documents that are collectively regarded to be an invoice. In such instances the Recipient may apply for an administrative exception if the requirements of Article 59(7) of the Executive Regulation are met.

Input Tax recovery

Registrants are eligible to recover Input Tax to the extent the Concerned Services are used (or are intended to be used) to make Taxable Supplies,^[6] provided the relevant supporting documents are obtained and retained.^[7]

The Registrant may recover the Input Tax in the first Tax Period (or the immediately following Tax Period) in which the Registrant obtained the relevant supporting document (e.g. Tax Invoice or invoice issued by the overseas supplier) and paid the Consideration.^[8]

Hence, the Recipient would be eligible to recover Input Tax even if it did not issue a Tax Invoice to itself, provided that it retains the invoice issued by the overseas supplier (or combination of documents that are collectively regarded to be such invoice).

For Input Tax recovery purposes, the Recipient is regarded as having made payment if it pays or intends to pay the Consideration within six months of the agreed date for payment.^[9] For more information on the timeframe for recovering Input Tax, please refer to the Public Clarification (VATP017).