TaxSavvyAE

Reverse charge on foreign software

We pay for software subscriptions from a US company. What do we put in the VAT return?

The situation

Services bought from abroad by a VAT-registered business are under reverse charge. You declare output VAT and, if the cost is for taxable supplies, recover the same as input VAT.

The law

  • Art 48, Federal Decree-Law 8 of 2017: Reverse charge on imported services

What it means for you

Example: USD 1,000 a month subscription at about AED 3,673. Declare AED 183.65 output VAT in the reverse charge box and the same as input VAT. Net effect is nil for a fully taxable business. From 2026 a self-invoice is not required in many reverse charge cases, but keep the supplier invoice.

What to do

  1. Convert the invoice to AED.
  2. Declare 5 percent in the reverse charge box.
  3. Claim the same input VAT if fully taxable.
  4. Keep the foreign invoice.

We can do this for youVAT return filing (VAT201) on EmaraTax: output and input VAT, reverse charge, corrections and payment: AED 850

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