What is Reverse Charge Mechanism Under VAT in the UAE?
In the UAE VAT, the Reverse Charge Mechanism is applicable while importing goods or services from outside the GCC countries. Under this, the businesses will not have to physically pay VAT at the point of import.
The responsibility for reporting of a VAT transaction is shifted from the seller to the buyer; under Reverse Charge Mechanism. Here the buyer reports the Input VAT (VAT on purchases) as well as the output VAT (VAT on sales) in their VAT return for the same quarter.
The reverse charge is the amount of VAT one would have paid on that goods or services if one had bought it in the UAE. The importer has to disclose the amount of VAT under both Input VAT as well as Output VAT categories of the VAT return of that quarter.
Reverse Charge Mechanism eliminates the obligation for the overseas seller to register for VAT in the UAE.