UAE VAT Clarification: Impact on Goods & Services Imports

If you're a business owner in the UAE, you’ve probably come to accept VAT as one of those unavoidable parts of doing business, like traffic on Sheikh Zayed Road or last-minute meetings.

But just when things seem settled, the Federal Tax Authority (FTA) releases a new clarification, and suddenly, everyone’s talking about the Reverse Charge Mechanism (RCM), imported services, and whether businesses now need to issue tax invoices to themselves.

Let’s break down what the latest FTA clarification really means, who it affects, and what you need to do (or not do) about it.

What Is the Reverse Charge Mechanism?

The Reverse Charge Mechanism (RCM) is a VAT provision that shifts the responsibility for accounting for VAT from the supplier to the buyer. It’s used for imported goods or services, ensuring that VAT is collected correctly across borders.

When applying RCM, the buyer declares both the output VAT (as if they were the seller) and the input VAT (as the recipient). In most cases, this results in no net VAT payment—unless you’re in a partially exempt sector like finance, education, or healthcare, where full VAT recovery isn’t always allowed.

The Latest Clarifications: What Actually Changed?

In April and May 2025, the FTA issued two public clarifications:

• VATP041 (April 2025): Focused on how businesses, especially in the banking sector, should treat certain cross-border payments like SWIFT message fees.
• VATP044 (May 2025): Broader guidance on how to document imported services under RCM, without necessarily issuing a tax invoice to yourself.

These clarifications do not change the law, but they do tighten expectations around documentation.

Important Note: You do not need to self-invoice under RCM if you have valid, compliant documentation from your supplier.

What Counts as “Compliant Documentation”?

According to VATP044, the FTA accepts a variety of documents as evidence of taxable imported services under RCM. These include:

• A VAT-compliant supplier invoice
• Qualifying documentation that shows the nature, value, and supplier of the service

In the case of SWIFT fees (common in banking), qualifying SWIFT messages can serve as valid documentation, meaning no need to issue a self-invoice for every transaction.

What If You Don’t Have a Valid Supplier Invoice?

This is where self-invoicing may come into play.

If you're importing services and:

• The supplier has not issued a tax invoice
• The invoice is incomplete or non-compliant
• You can't reasonably obtain proper documentation

Then you may need to issue a self-tax invoice to claim the input VAT under RCM. This helps establish a clear audit trail and ensures your VAT recovery is compliant with FTA expectations.

When you get a proper VAT invoice from your overseas supplier, whether it’s for general services or SWIFT fees, you don’t need to create your own invoice.

But if there’s no invoice, or the one you have is missing key details, then you’ll have to issue a self-invoice to claim your VAT back. Remember, these rules only apply to imported services; goods brought in using customs paperwork aren’t affected.

What Businesses Should Do Now

Review Your Documentation

Ensure you receive VAT-compliant invoices (or equivalent) for all imported services. For SWIFT and similar services, confirm if your documentation meets FTA standards.

Issue Self-Invoices Only When Necessary

Self-invoicing is only needed if no compliant documentation is available.

Consult a Tax Advisor

Especially if you're in a partially exempt sector where recovering input VAT is more complex.

Update Accounting Systems

Make sure your systems can record reverse charge entries and, where applicable, issue self-invoices efficiently.

Ready to Stay Compliant with UAE VAT Rules? We’re Here to Support You.

Navigating the latest VAT clarifications around imports and the Reverse Charge Mechanism doesn’t have to be complicated. At 10xM, we help businesses like yours make sense of evolving FTA expectations—whether you need to implement self-invoicing, tighten documentation, or simply ensure your current practices are compliant.

Our experienced tax team is here to guide you through every step, making sure you stay audit-ready, penalty-free, and focused on what matters most: growing your business.

Book a free consultation with us today and get the clarity and confidence you need.