18 August 2026 · VAT return
Recording Reverse Charge in Your VAT Return
Under reverse charge you record the transaction on both sides of your VAT 201: the output VAT on the imported supply goes in Box 3, and, where recoverable, the matching input VAT is claimed in Box 10 of the same period. When the input is fully recoverable the two entries offset and the net VAT effect is nil — but both entries must still appear and be supported by documentation. The VAT amendments effective 1 January 2026 removed the requirement to issue a self-invoice for reverse charge treatment, provided the required supporting records are retained, which shifts the compliance burden from a filing step to a documentation standard.
Exiloz Management & Tax Consultant · Dubai-based FTA-focused advisory · VAT, corporate tax & accounting
Report on both sides
A reverse charge transaction is two matching entries, not one. The output tax on concerned imported services is declared in Box 3 of the VAT 201, and where the business is entitled to recover the tax, the input side is reflected in Box 10 in the same period. Missing either box creates a mismatch between your declared output and input tax that stands out in an FTA review.
- Declare output VAT on the imported supply in Box 3, calculated on the invoiced value at the standard rate.
- Claim recoverable input VAT in Box 10 in the same period, subject to the normal input tax recovery conditions.
- The net cash effect is nil when the input is fully recoverable and both entries are reported correctly.
- Where input is restricted — for example on a partly exempt activity — a real, unrecoverable cost arises.
- The recovery test depends on how the imported service is used, not just on who supplied it.
- Filing outcome depends on the nature of the expense, its business use, and the records behind it.
Keep the support
Under the amendments effective 1 January 2026, taxable persons are relieved from issuing a self-invoice when applying reverse charge, provided the required supporting documents are retained. That relief removes a filing step, but it raises the bar on the underlying paper trail — the FTA still needs to see what was bought, from whom, and why VAT was self-accounted.
- Retain the original supplier invoice and any accompanying contract or purchase order.
- Self-invoices are no longer required as the default rule, but the supporting documents behind the transaction still are.
- Keep a running schedule of RCM transactions for each return period, cross-referenced to the ledger.
- Reconcile RCM entries to your general ledger and bank or card statements before filing.
- Retain payment evidence and delivery confirmation, since these support both the value declared and the use of the service.
What else changed alongside the self-invoice relief
The self-invoice relief did not arrive alone. The same 2026 amendment package introduced a five-year limit for reclaiming excess refundable tax after reconciliation, and it gives the FTA the power to deny input tax recovery where a supply forms part of a tax-evasion arrangement. Both points matter directly for reverse charge, because they tighten the standard your Box 10 claim has to meet.
- A five-year limit now applies to reclaiming excess refundable tax after reconciliation, so stale RCM positions should be cleaned up promptly.
- The FTA can deny input tax recovery, including RCM input tax, where the underlying supply is linked to a tax-evasion arrangement.
- Genuine, well-documented reverse charge transactions are unaffected, but the margin for sloppy record-keeping has narrowed.
- Historic periods with weak RCM documentation are worth reviewing now, before a five-year window closes on any correction.
Building a return you can defend
Reporting reverse charge correctly is less about knowing the rule and more about running the same process reliably every quarter. Exiloz sets up the RCM schedule, maps each transaction to Box 3 and Box 10, and keeps the supporting file organised so the return holds up if the FTA asks questions later.
- We build a per-period RCM schedule that ties directly to your Box 3 and Box 10 entries.
- We confirm recoverability supplier by supplier, so partly exempt activity does not get treated as automatically neutral.
- We assemble the invoice, contract and payment file the FTA expects under the post-2026 documentation standard.
- We flag historic periods that need a voluntary disclosure before the five-year reclaim window becomes relevant.
Related guides
Frequently Asked Questions
For finance teams reporting reverse charge VAT and mapping it to the right boxes on the VAT 201.
Where does reverse charge go in the VAT return?
The output tax on the imported supply is declared in Box 3, and where the business is entitled to recover it, the input tax is reflected in Box 10 of the same VAT 201. Both entries should appear in the same filing period as the transaction.
Do I need to issue a self-invoice in 2026?
Not as the default rule. The VAT amendments effective 1 January 2026 relieved taxable persons from issuing self-invoices when applying reverse charge, provided the required supporting documents are retained. Older guidance that treats a self-invoice as mandatory is now out of date.
When is reverse charge a real cost rather than neutral?
When the input VAT is not fully recoverable — most commonly because the business carries out a partly exempt activity such as certain financial services or residential leasing — the output side is not fully offset, and the shortfall is a genuine cash cost.
What is the five-year limit introduced in 2026?
It is a new time limit on reclaiming excess refundable tax after reconciliation. It sits alongside the self-invoice relief in the same amendment package and is a reason to clear up any stale or unreconciled RCM positions sooner rather than later.
Can the FTA deny input tax recovery on a reverse charge transaction?
Yes. Under the 2026 amendments the FTA can deny input tax recovery where the supply forms part of a tax-evasion arrangement. Genuine, properly documented transactions are not affected, but this raises the value of clean supporting records.
What documents should back up a Box 10 claim?
The supplier invoice, the underlying contract or order, payment evidence, and confirmation that the service was used to make taxable supplies. A self-invoice is no longer required, but this evidence file is what replaces it in practice.
Can Exiloz set up RCM reporting for us?
Yes. We build the RCM schedule, confirm recoverability per supplier, map entries to Box 3 and Box 10, and keep the supporting documentation organised for each filing period.
Report reverse charge correctly, every period
Exiloz builds your RCM schedule, maps it to Box 3 and Box 10, and keeps the supporting file the FTA expects.