Things to Know About Reverse Charge Mechanism under VAT in UAE

The Value Added Tax or VAT is commencing in the United Arab Emirates with effect from January 1, 2018. As the D-day approaches, various concerns regarding the VAT regulations and related issues are steadily rising among the Emiratis. The Reverse Charge Mechanism under the latest VAT regulation is certainly one of those concerns.

According to the VAT regulations in the UAE, the Reverse Charge Mechanism is pertinent during the import of goods and services from outside the GCC (Gulf Co-operation Council) countries. This provision frees the business from physically paying VAT at the point of import.

Sellers are no longer responsible for the reporting of a VAT transaction. Instead of them, the buyers will now have to do the reporting, under the Reverse Charge Mechanism. In the new tax regulation, buyers have to report the Input VAT (which is the VAT on purchase) along with the output VAT (which is the VAT on sales) in their VAT return for the particular quarter.

The Reverse Change is nothing but the amount of VAT that a person might have paid if he/she has purchased the goods or services in the UAE. According to the latest report on Reverse Charge Mechanism, the importer needs to reveal the amount of VAT under both Input VAT as well as Output VAT categories of the VAT return in the particular quarter. This Reverse Charge Mechanism relieves the overseas sellers to register of VAT in the UAE.

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