Defining Concerned Services

Under to Federal Decree-Law No. 8 of 2017 on Value Added Tax, “Concerned Services” are services that are imported into the UAE and are supplied within the UAE. These services would not be exempt if they were supplied locally. According to Article 48(1) of the Decree-Law, a taxable person is considered to have made a taxable supply to themselves when they import such services for commercial purposes. This self-supply results in specific VAT obligations, which are elaborated below.

Accounting for Output Tax

According to the reverse charge mechanism, output tax must be accounted for by taxable individuals who import Concerned Services. Calculating the tax due and reporting it in Box 3 of their VAT return for the tax period in which the supply occurs is the process. According to Article 48(1), the importation of Concerned Services is considered a taxable self-supply. Businesses must ensure accurate calculation and timely reporting to comply with UAE VAT regulations.

Tax Invoice Requirements

Registrants are required to issue a tax invoice within 14 days of a taxable supply, as stipulated in Article 67(1) of the Decree-Law. In general, the registrant is obligated to issue a tax invoice to themselves for Concerned Services, as they serve as both the supplier and the recipient. However, the FTA provides an administrative exception under Article 59(7)(b) of the Executive Regulation. If the registrant keeps the overseas supplier’s invoice, which shows the service and payment, and correctly accounts for VAT under the reverse charge mechanism, they may not need to issue a self-invoice.

If the overseas supplier doesn’t provide an invoice like for reinsurance services, a document or set of documents can serve as a substitute if they include:

  • (a) The supplier’s name and address.
  • (b) The recipient’s name and address.
  • (c) The issuance date of the document.
  • (d) The date the service was completed.
  • (e) A description of the service provided.
  • (f) The consideration for the supply, including the currency and, where applicable, payment terms.

Article 59(7) says that registrants can apply for an administrative exception to the self-invoicing requirement if they don’t suitable documentation. subject to FTA approval, to waive the self-invoicing requirement. This flexibility is meant to make sure that everyone follows the rules while also making things easier for the people.

Input Tax Recovery

  • According to Article 54(1)(a) of the Decree-Law, registrants can get back input tax on Concerned Services as long as those services are used or meant to be used to make taxable supplies. To be eligible, registrants must:

    • (a) Be registered for VAT.
    • (b) Retain relevant supporting documents, such as the overseas supplier’s invoice or equivalent.
    • (c) Have paid or intend to pay the consideration within six months of the agreed payment date, per Article 54(2) of the Executive Regulation.

    The registrant can get the input tax in the first tax period (or the one right after that) when they have the supporting documents and have paid the tax. It is important to note that recovery is possible even without a self-issued tax invoice, as long as the supplier’s invoice or similar paperwork is kept. For additional guidance on input tax recovery timelines, the FTA refers to Public Clarification VATP017.

     

Legislative Framework

  • The clarification is supported by the following key provisions:

    • (a) Federal Decree-Law No. 8 of 2017: Defines terms such as “Concerned Services,” “Taxable Supply,” and “Due Tax,” and outlines taxable persons’ obligations.
    • (b) Cabinet Decision No. 52 of 2017 (Executive Regulation): Detail rules for tax invoices and input tax recovery, including administrative exceptions.
    • (c) Article 48(1): Classifies imports of Concerned Services as taxable self-supplies.
    • (d) Article 59(7): Permits the FTA to waive tax invoice requirements under specific conditions.
    • (e) Articles 54 and 55: Specify conditions and timing for input tax recovery.

Practical Considerations for Businesses

  • To ensure compliance with VATP044, businesses importing Concerned Services should:

    1. Verify the Place of Supply: Confirm that the services qualify as Concerned Services with a place of supply in the UAE.
    2. Accurately Account for Output Tax: Use the reverse charge mechanism to calculate and report VAT in the correct tax period.
    3. Maintain Robust Documentation: Retain supplier invoices or equivalent documents to support input tax recovery and comply with administrative exceptions.
    4. Seek Administrative Exceptions if Necessary: Apply for an exception from the FTA if no supplier invoice is available, ensuring compliance with Article 59(7).
    5. Monitor Payment Deadlines: Ensure payment or intent to pay within six months to qualify for input tax recovery.