Clarification on Reverse Charge Mechanism for Import of Goods

Clarification on Reverse Charge Mechanism for Import of Goods

by | Aug 26, 2026

The Federal Tax Authority (“FTA”) has issued a VAT Public Clarification VATP045 (‘the Clarification’) clarifying the accounting for Output Tax, issuing of Tax Invoices and Input Tax recovery on Imports of concerned goods. The key aspects of the Clarification are summarized below

Key Aspects Clarification
Self-Invoicing for RCM
  • Effective 1 January 2026, there is no requirements to issue self-invoice on importing goods
  • Prior to 1 January 2026, there was a requirement to issue self-invoice (since it is considered as making a Taxable Supply to itself), unless the FTA administrative exception applies
  • Considering the administrative burden of issuing self-invoices, the FTA accepts that a self-invoice need not be issued where the importer:
    • Retains the foreign supplier’s invoice reflecting the details and the consideration paid;
    • Retains the relevant Emirate Customs declaration with details and value; and
    • Ensures that the correct VAT is reflected in Box 6 or necessary adjustment is made in Box 7 of the VAT Return
Accounting of Output Tax and reporting
  • Import of goods is treated as a Taxable Supply to self, and the importer is required to account for the applicable Output VAT
  • Importer should reconcile the import value and Output VAT pre-populated in Box 6 with its records and any discrepancy should be adjusted in Box 7
Input Tax Recovery Input VAT may be recovered to the extent the imported goods are used, or intended to be used, for making taxable supplies, subject to meeting the applicable eligibility and documentary requirements, such as:

  • Document retention: Retain the foreign supplier’s invoice and relevant Customs declaration
  • Recovery timeline: Input VAT may be recovered in the first Tax Period, or the immediately following Tax Period, in which the relevant supporting documents are obtained and the consideration is paid
  • Payment condition: For this purpose, the recipient is treated as having paid the consideration where it pays or intends to pay within six months from the agreed payment date
Credit Notes Where a self-tax invoice was issued on import of goods and a subsequent adjustment is made in relation to those goods, there is a requirement to issue a self-tax credit note

Key takeaway:

  • Update VAT SOPs, tax accounting manuals and internal controls accordingly
  • Ensure appropriate documentation are maintained specifically the foreign supplier’s invoice and customs declarations
  • Reconcile the import value and Output VAT disclosed in the VAT Return vis-a-vis the company’s customs and accounting records
  • Where consideration has not yet been paid to overseas vendor, assess whether the business pays or intends to pay within six months from the agreed payment date

Please click here to download the VAT Public Clarification

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