Reverse charge under UAE VAT: when it applies and how to account for it

Under the UAE reverse charge mechanism in Article 48 of the VAT Decree-Law, the buyer, not the seller, accounts for the VAT. It applies when a VAT-registered business imports goods or services, and to some sales between UAE registrants: oil and gas, precious metals and stones, phones and computers, and metal scrap. The buyer declares the VAT and, where the normal rules allow, recovers it in the same return.

Key takeaways

• Under the reverse charge, the business that receives a supply accounts for the VAT instead of the supplier.
• A registered business that imports goods or services for its business accounts for the VAT on them in its own return.
• Between UAE registrants, it covers oil and gas, precious metals and stones, electronic devices and, from 14 January 2026, metal scrap, when the buyer intends to resell the goods or use them for a purpose the rules list, such as production.
• For goods and services imported on or after 1 January 2026, the importer no longer issues itself a tax invoice, but it must keep the supporting documents.
• For a business that can recover input VAT in full, the VAT declared and the VAT recovered cancel out.

On this page 9 sections

What the reverse charge is

The reverse charge, often shortened to RCM, moves the duty to account for VAT from the supplier to the business that receives the supply. Normally a registered supplier adds VAT to its price and pays it to the Federal Tax Authority (FTA). Under the reverse charge the supplier charges no VAT; the buyer reports the VAT as tax due and, where entitled, recovers it as input tax, often in the same return.

The rules sit in Article 48 of Federal Decree-Law No. 8 of 2017 on VAT and Article 48 of its Executive Regulation. Article 48(8) lets the Cabinet add other goods or services, as it has for electronic devices, precious metals and stones, and metal scrap. The VAT is charged at the rate that would apply to the same supply made in the UAE, usually the standard rate.

Standard VAT rate

5%

UAE VAT is charged at a standard rate of 5% on taxable supplies and imports of goods and services, unless a supply is zero-rated or exempt.

Imports that would be exempt if supplied in the UAE are outside the import reverse charge: the law covers only “concerned goods” and “concerned services”, which it defines as imports that would not be exempt.

Imported services

A VAT-registered business that buys services from abroad for its business accounts for the VAT on them itself, because the overseas supplier charges none.

Imports under the reverse charge

Recipient accounts for the VAT on imports (reverse charge)

Where Article 48(1) of the VAT Decree-Law applies to a Taxable Person that imports Concerned Goods or Concerned Services, it must account for VAT on them at the rate that would apply if the supply were made by a Taxable Person in the UAE, declare and pay it in the VAT return for the Tax Period in which the date of supply falls, and keep the supplier's invoice showing the details and the consideration paid and, for goods, a customs statement showing their details and value.

The rule covers services whose place of supply is the UAE. Article 48(3) of the Executive Regulation applies it to any goods or services with a UAE place of supply that a UAE-resident taxable person receives from a non-resident supplier that charges no VAT. Advice from an overseas consultancy and a software subscription billed from abroad are typical illustrations. The value is the market value of the consideration, without VAT (Article 34(3) of the VAT Decree-Law). Imported goods and services that would not be exempt also count towards the threshold for VAT registration (Article 19).

Imported goods

Goods imported by a registered business are under the reverse charge too, but the customs declaration feeds the figures into the VAT return. Among other conditions, the importer must be registered at the time of import and give the FTA the customs registration number for that import (Article 48(1) of the Executive Regulation).

Import VAT in the return

Box 6 (prepopulated import VAT) and Box 7 (adjustments)

VAT on goods imported by a Taxable Person is prepopulated in Box 6 of its VAT return, which the business must reconcile with its own records for the Tax Period of the date of supply; discrepancies, and goods imported on its behalf by another person, are adjusted in Box 7.

For import VAT, the value is the customs value, including insurance and freight, plus any customs duty and excise tax paid on the import, without VAT (Article 35 of the VAT Decree-Law). Goods with a customs value of AED 100,000 that pay AED 5,000 of customs duty have a VAT value of AED 105,000, so the VAT is AED 105,000 × 5% = AED 5,250. The figures are illustrations.

The input tax can be recovered in the first tax period, or the next, in which the business holds the overseas supplier’s invoice and the customs declaration and has paid the price, or intends to pay it within six months of the agreed date (Article 55 of the VAT Decree-Law and Article 54(2) of its Executive Regulation). An unregistered importer, or a registrant that misses the conditions above, pays the VAT before customs releases the goods (Article 50(1) of the Executive Regulation). Clearance is covered in importing goods into the UAE.

Domestic reverse charge between UAE registrants

Four groups of goods sold between two UAE VAT registrants fall under the reverse charge, but only when the buyer intends to resell them or use them for a purpose the rules list, and only if the paperwork is in place before the date of supply.

Oil, gas and hydrocarbons

This rule is written into the VAT Decree-Law itself, in Article 48(3) to (6).

Oil, gas and hydrocarbons

Recipient accounts for VAT (oil, gas and hydrocarbons between registrants)

Where a registrant supplies crude or refined oil, processed or unprocessed natural gas or pure hydrocarbons in the UAE to another registrant that intends to resell them or use them to produce or distribute energy, the supplier does not account for VAT and the recipient calculates and accounts for it, provided the recipient gave written declarations of its purpose and registration before the date of supply.

It does not apply to a zero-rated export or to a supply that includes other goods or services. A supplier that relied on the buyer’s declaration of registration is not liable for the VAT unless it knew, or should have known, that the buyer was not registered; if it should have known, the two are jointly and severally liable for the tax and the related penalties (Article 48(5) and (6)).

Precious metals, stones and jewellery

Cabinet Decision No. 127 of 2024 sets this rule.

Precious metals, stones and jewellery

Reverse charge on precious metals, stones and jewellery from 15 February 2025

Where a supplier supplies precious metals (gold, silver, palladium, platinum), precious stones (natural and synthetic diamonds, pearls, rubies, sapphires, emeralds) or jewellery in which they make up most of the value to a registered recipient that intends to resell them or use them in producing or manufacturing such goods, the supplier does not account for VAT and the recipient accounts for it.

Issued on 16 December 2024, it repealed Cabinet Decision No. 25 of 2018, which had applied a reverse charge to gold and diamonds traded between registrants.

Mobile phones, computers and tablets

Cabinet Decision No. 91 of 2023 sets the rule for electronic devices.

Mobile phones, computers and tablets

Reverse charge on phones, computers and tablets from 30 October 2023

Since 30 October 2023, when a VAT registrant supplies mobile phones, smartphones, computer devices, tablets or their parts to a registrant that intends to resell them or use them to produce or manufacture electronic devices, the supplier does not account for VAT and the recipient accounts for it in Box 3 of its VAT return, provided the recipient's written declarations were received before the date of supply.

The FTA’s clarification VATP034 reads “computer devices” widely, from desktops to servers and engine control units for cars. Wired phones are outside the scope, and so are e-readers marketed as such that lack other features such as web browsing or games. A sale from the mainland to a designated zone is not an export, so the reverse charge still applies to it.

Metal scrap

Cabinet Decision No. 153 of 2025 added metal scrap.

Metal scrap

Reverse charge on metal scrap from 14 January 2026

From 14 January 2026, when a VAT registrant supplies metal scrap (ferrous or non-ferrous metal waste with commercial value that is usable after processing) to a registrant that intends to resell it or use it in processing, the supplier does not account for VAT and the recipient accounts for it, provided the recipient gave written declarations before the date of supply and the supplier verified its registration.

Under the FTA’s clarification VATP047, goods made mainly of scrap metal count, such as used lead-acid batteries in which lead is the main component. Paper, plastics, glass, textiles and rubber scrap follow the normal rules. Processing means turning scrap into material for new products; scrap bought to repair racks or fences on the buyer’s own premises is outside the scope.

Conditions both sides must meet

In all four cases, the reverse charge depends on paperwork exchanged before the date of supply.

• The buyer gives the supplier two written declarations: that it buys the goods to resell them or use them for a listed purpose, and that it is registered for VAT, with its registration details. The FTA’s clarifications on electronic devices and metal scrap accept both in one document.
• The supplier keeps the declarations and checks the buyer’s registration by the means the FTA approves; for electronic devices and metal scrap, the FTA names the TRN verification tool on its website.
• The tax invoice states that the buyer must account for the tax, with a reference to the provision of the law (Article 59(1)(l) of the Executive Regulation).
• Exports that meet the conditions are zero-rated instead.
• Goods for the buyer’s own use, such as phones handed out to staff, are taxed in the normal way.

Reporting reverse charge VAT in the return

The buyer reports reverse-charge VAT as tax due in the return for the period in which the date of supply falls and, where entitled, claims it back as input tax under the normal recovery rules. For metal scrap and electronic devices, the FTA names the boxes.

Domestic reverse charge in the return

Box 3 (VAT due) and Box 10 (recovery)

For metal scrap supplied under the reverse charge, the FTA states that the recipient declares the supplies in Box 3 of its VAT return and may recover the recoverable tax in Box 10, and that Box 9 is not used to recover that input tax; its clarification on electronic devices also has the recipient declare the due tax in Box 3.

For imported services, the VAT is declared as tax due under the reverse charge and recovered under the normal input tax rules; imported goods use Boxes 6 and 7, as described above. The supplier does not report the VAT on a domestic reverse-charge sale in its own return. Deadlines and the other boxes are covered in filing the VAT return.

Journal entries

A reverse-charge purchase is usually booked as two pairs of entries: debit the expense, stock or asset account and credit the supplier with the price; then debit recoverable input VAT and credit VAT payable with the VAT. Where only part of the VAT is recoverable, only that part goes to input VAT and the rest is a cost of the purchase. This is a generic double-entry illustration, not an accounting standard; the worked example below shows it with figures.

Invoices and records after 1 January 2026

For goods and services imported on or after 1 January 2026, the importer no longer writes itself an invoice; it keeps the documents it receives instead.

Self-invoicing

No self-invoice for imports from 1 January 2026

Federal Decree-Law No. 16 of 2025 amended Article 48(1) of the VAT Decree-Law to remove the requirement for a Taxable Person to issue a Tax Invoice to itself when importing Concerned Goods or Concerned Services; it must still account for the VAT and keep the supporting documents set out in the Executive Regulation, and the relief applies only to goods and services imported on or after 1 January 2026.

For goods imported before 2026, the importer was expected to issue itself a tax invoice, though the FTA’s clarification VATP045 accepted none where the business kept the overseas supplier’s invoice and the customs declaration and checked the VAT shown in Box 6 or corrected it in Box 7; for services imported before 2026, the FTA refers to its clarification VATP044. The documents to keep now are those in Article 48(5) of the Executive Regulation: the supplier’s invoice showing the details and the price and, for goods, the customs statement.

How long to keep the records

5 years after the Tax Period

Unless the tax law says otherwise, a taxable person must keep its accounting records, commercial books and information for five years following the Tax Period to which they relate, plus a further four years where there is a dispute with the FTA (or until it is finally settled, if later), an ongoing tax audit, or a notified intention to audit.

Federal Decree-Law No. 16 of 2025 also lets the FTA reject the deduction of input tax on a supply linked to tax evasion where the business knew, or should have known, of the link; a business that did not verify its supplies before deducting the input tax is treated as one that should have known (VATP046). In domestic cases the supplier still issues a tax invoice carrying the reverse charge statement. The rest of what a tax invoice must show, such as both parties’ tax registration numbers, is set by Article 59(1) of the Executive Regulation.

Worked example

Two illustrations, one import and one domestic purchase, show the arithmetic.

Worked example

Consultancy bought from abroad

The company, the supplier and the amounts are illustrations.

1. A UAE VAT-registered trading company buys consultancy for AED 20,000 from a firm with no UAE establishment, which charges no VAT.
2. VAT under the reverse charge: AED 20,000 × 5% = AED 1,000, declared as tax due.
3. All the company’s supplies are taxable and it pays the fee in the same tax period, so it recovers the AED 1,000 as input tax in the same return: AED 1,000 less AED 1,000 = AED 0.

Entry (illustration)	Debit (AED)	Credit (AED)
Consultancy expense	20,000
Supplier		20,000
Recoverable input VAT	1,000
VAT payable		1,000

Net VAT to pay on this purchase: AED 0.

Worked example

Gold jewellery bought for resale

The jeweller, the supplier and the amounts are illustrations.

1. A registered jeweller buys gold jewellery for resale for AED 50,000 from a UAE registrant, after giving both written declarations.
2. The supplier charges no VAT. The jeweller declares VAT of AED 50,000 × 5% = AED 2,500 as tax due and, as all its supplies are taxable, recovers AED 2,500 as input tax.
3. Without the declarations, the supplier would charge AED 2,500 that the jeweller could not recover: AED 50,000 + AED 2,500 = AED 52,500 in total.

Net VAT with the declarations in place: AED 0.

A business that also makes exempt supplies recovers only the share of input tax that relates to its taxable supplies, so part of the reverse-charge VAT stays as a cost; zero-rated and exempt supplies explains the difference. Rates, registration and returns are covered in the VAT and excise guides.