Imports from non-resident suppliers
When you import goods or services from a supplier based outside the UAE who is not registered here, you account for the VAT rather than the supplier.
Tax guide · UAE
The reverse charge mechanism, made clear
On some UAE supplies you — the buyer — account for the VAT instead of the seller. Here is when the reverse charge applies, how you report it on the VAT 201, and why it is usually cash-neutral.
What the reverse charge does
Normally the supplier charges VAT, collects it, and pays it to the FTA. The reverse charge mechanism flips that: for certain supplies, the registered recipient accounts for the VAT instead of the supplier. You declare the VAT as if you had charged it to yourself, and — where the purchase relates to your taxable activity — you recover the same amount in the same return.
The mechanism exists so the FTA can capture VAT on cross-border and specified domestic supplies without requiring every overseas supplier to register in the UAE. It keeps the tax visible while removing a compliance burden from suppliers who are not established here.
When the reverse charge applies
The mechanism is triggered in three main situations for UAE businesses.
Certain domestic hydrocarbons
Specified supplies of crude or refined oil, unprocessed or processed natural gas, and related hydrocarbons between registered businesses fall under the reverse charge.
Goods leaving a Designated Zone
When goods move out of a Designated Zone into the UAE mainland, the recipient generally self-accounts for the VAT due on that supply.
The Designated Zone case connects to a wider set of rules — see our guide to Designated Zones and VAT.
How you account for it
Reverse charge supplies are reported on both sides of your VAT 201. Get both entries right and the return reflects the transaction accurately.
Record output VAT
You calculate the VAT that would have applied — normally 5% — and report it as output VAT in your VAT 201, exactly as if you had charged it.
Recover input VAT
In the same return, you claim the corresponding input VAT, to the extent the purchase relates to your taxable activity and is not blocked input tax.
Net effect is often nil
When the input VAT is fully recoverable, the output and input entries cancel out — so there is no cash cost, only a reporting obligation you must get right.
Where input VAT is not fully recoverable — for example if it relates to exempt activity or is blocked input tax — the reverse charge does create a real cost, because the output VAT you declare is not matched by an equal recovery.
How AIMuhaseb helps
Reverse charge, handled automatically
AIMuhaseb recognises reverse charge supplies as you record imports and specified purchases, posting both the output and input VAT entries so your VAT 201 reflects the transaction correctly and nets to nil where it should. No manual double entries, no missed self-accounting.
FAQ
Reverse charge questions, answered
What is the reverse charge mechanism in UAE VAT?
The reverse charge mechanism shifts responsibility for accounting for VAT from the supplier to the recipient of the supply. Instead of the supplier charging and collecting VAT, the registered recipient reports the output VAT on their own VAT 201 and, where eligible, recovers the same amount as input VAT in that return. It applies mainly to cross-border and certain specified domestic supplies.
When does the reverse charge apply?
It applies to imports of goods and services from non-resident suppliers who are not registered in the UAE, to certain supplies of domestic hydrocarbons between registered businesses, and to goods leaving a Designated Zone into the UAE mainland. In each case the recipient self-accounts for the VAT rather than the supplier charging it.
How do I account for reverse charge VAT?
You calculate the VAT that would apply to the supply — normally at 5% — and report it as output VAT in your VAT 201. In the same return you claim the corresponding input VAT to the extent the supply relates to your taxable business and is not blocked. Both entries appear in the return, which keeps the FTA informed of the transaction.
Does the reverse charge cost me anything?
Usually not in cash terms. When the input VAT is fully recoverable, the output VAT you declare and the input VAT you reclaim offset each other, so the net effect on the return is nil. A cost arises only if the related input VAT is partly or wholly non-recoverable — for example if it relates to exempt activity or is blocked input tax.
Do I need a supplier tax invoice for the reverse charge?
Because the non-resident supplier does not charge UAE VAT, you rely on your own records and the supplier’s invoice to evidence the supply and its value. You must keep documentation that supports both the output VAT you declare and the input VAT you recover, so the transaction is fully traceable if the FTA reviews it.
How is the reverse charge different from zero-rated supplies?
They are separate concepts. A zero-rated supply is taxed at 0% by the supplier, who still reports it. Under the reverse charge, the standard treatment (usually 5%) still applies to the supply, but it is the recipient — not the supplier — who accounts for that VAT. Reverse charge is about who reports the VAT; zero-rating is about the rate itself.
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