The Federal Tax Authority issued a Public Clarification which clarifies the requirement to account for the Output Tax and issue Tax Invoices by the recipient of services to himself in respect of Concerned Services (i.e. import of services) and the documentary requirements for recovering Input Tax in respect of these Services.

Concerned services: “Services that have been imported, where the place of supply is considered to be in the State (UAE) and would not be exempt if supplied in the State”.

Detailed analysis

Import of services by a UAE tax registrant from a non-resident supplier attracts RCM, where the recipient has to account for output VAT in their VAT return and claim the input under RCM, subject to conditions mentioned in Article 48 of the Executive Regulations. In the case of the import of services, in some instances, the importer may not get a proper invoice from the non-resident supplier. The detailed description of the services and other details may not be reflected on the invoices properly. But the importer will be reporting those services as an import of services and claims under RCM without having proper supporting evidence to treat them as an import of services. This can lead to non-compliance with VAT recordkeeping requirements and potentially result in errors in VAT returns.

According to Public clarification VATP044, the Taxable Person is regarded as making a Taxable Supply to itself when it imports a Concerned Service. Consequently, the Taxable Person is responsible for accounting for the Due Tax on the Service received, and reporting 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 happened.

A Registrant receiving the Concerned Service is required to;

• Account for Output Tax in respect of the Concerned Service in his VAT return, and
• Issue a Tax Invoice to itself, unless the recipient obtained an administrative exception from the FTA allowing them not to issue a tax invoice.

The 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.

When is self-issuance of a tax invoice not required?

As per Article 59(7)(b) of the Executive Regulation, the FTA may determine that a Tax Invoice is not required to be issued if the following conditions are met.

• Where there are (or will be) sufficient records available to establish the particulars of any supply or class of supplies, and
• It would be impractical to require the issuanceor delivery of a Tax Invoice by the Registrant.

Considering the administrative burden of issuingtax 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 is 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.

Would an alternative document be considered acceptable?

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.

Apply for an administrative exception to the FTA

The above administrative exception does not apply in instances where the overseas supplier does not issue an invoice or a combination of documents that are collectively regarded as 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.