What is the reverse charge?
The reverse charge is the mechanism by which a UAE business receiving goods or services from outside the UAE accounts for the VAT itself, instead of the overseas supplier charging it. The recipient declares output tax and, where entitled to full recovery, reclaims the same amount in the same return.
The reverse charge is the mechanism by which a UAE business receiving goods or services from outside the UAE accounts for the VAT itself, instead of the overseas supplier charging it. The recipient declares output tax and, where entitled to full recovery, reclaims the same amount in the same return.
Why it exists
An overseas supplier is not UAE VAT-registered and cannot charge UAE VAT. Without the reverse charge, imported services would escape VAT entirely while the same service bought locally carried 5% — putting UAE suppliers at a disadvantage. The mechanism shifts the obligation to the recipient so the outcome is the same either way.
The entries
Declare output tax on the value of the imported supplyReclaim the same amount as input tax, where recovery is availableNet cash effect for a fully taxable business: nil
Why it is missed so often
Because nobody sends you a VAT invoice, so nothing appears to have happened. Overseas software subscriptions, cloud hosting, advertising platforms, offshore consultancy and franchise royalties all commonly trigger it, and the omission is one of the most frequent findings on a VAT review. The cash effect is usually nil — but the entries are mandatory, and a return missing them is incorrect.
Where the business is not entitled to full input tax recovery — because it makes exempt supplies, for instance — the reverse charge is not cash-neutral at all, and the unrecovered portion is a real cost.
Reviewed 18 August 2026 by Ahmed Nabil Selim. UAE tax rates, thresholds and deadlines change — confirm the position for your period before relying on it.
What Is the Reverse Charge — frequently asked
The reverse charge is the mechanism by which a UAE business receiving goods or services from outside the UAE accounts for the VAT itself, instead of the overseas supplier charging it. The recipient declares output tax and, where entitled to full recovery, reclaims the same amount in the same return.
Does this apply to you?
Definitions only go so far. Tell us how the business is set up and we will tell you where you actually stand.
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