VAT Compliance for UAE Free Zone Companies Importing Services: Reverse Charge Mechanism Explained

• UAE free zone companies import services from international suppliers to enhance operations.
• Imported services are subject to UAE VAT under the Reverse Charge Mechanism (RCM).
• RCM requires the recipient to account for VAT on imported services.
• VAT is calculated at a standard 5% rate on the value of services.
• Companies can recover input VAT if services are used for taxable business purposes.
• Example: ABC FZCO in JAFZA imports services valued at AED 100,000 and accounts for AED 5,000 VAT.
• VAT return reporting involves declaring the value and VAT in specific boxes on Form VAT 201.
• Box 3 is for supplies subject to RCM, and Box 10 is for recoverable VAT.
• Input VAT recovery is possible if services are used for making taxable supplies.

Source: claemirates.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

---

---