Reverse Charge (RCM)
Under the reverse charge mechanism, the buyer — not the supplier — accounts for VAT. It applies mainly to imports of goods and services and certain specified supplies, shifting the VAT reporting responsibility to the recipient.
Dubai-based, FTA-aware VAT support for UAE businesses.
The reverse charge mechanism (RCM) shifts the responsibility to account for VAT from the supplier to the buyer. It applies most commonly when a UAE business imports goods or services from outside the UAE, and to certain specified domestic supplies. Under RCM, the registered buyer records both the output VAT and the corresponding input VAT on their VAT return — often a nil net effect — so no cash changes hands for VAT but the transaction is correctly reported.
The reverse charge mechanism is most relevant when a UAE VAT-registered business buys from a supplier who is outside the UAE and not registered for UAE VAT. Instead of the foreign supplier charging VAT, the UAE buyer self-accounts for it. This covers imported services (such as software, consulting or digital services from abroad) and imported goods, as well as certain specified domestic supplies defined in the VAT legislation. It ensures cross-border purchases are taxed consistently with local ones.
Under RCM, the registered buyer records the output VAT it would have been charged and, where eligible, claims the same amount as input VAT — both on the same VAT return. For fully recoverable purchases this nets to zero VAT payable, but the figures must still be reported correctly in the right boxes of the return. Mistakes here are common: businesses either omit the reverse charge entirely or report it inconsistently, which can lead to corrections and penalties.
Because RCM is a reporting requirement rather than a cash payment in most cases, it is easy to overlook — especially for businesses that regularly buy software or services from abroad. Exiloz helps identify which of your purchases fall under the reverse charge, configures your accounting software to capture them, and ensures they appear correctly on each VAT return so your filings remain accurate and audit-ready.
The reverse charge mechanism (RCM) shifts the responsibility to account for VAT from the supplier to the buyer. It applies mainly to imports of goods and services and certain specified supplies, where the registered UAE buyer self-accounts for the VAT.
It typically applies when a UAE VAT-registered business imports goods or services from a supplier outside the UAE, and to certain specified domestic supplies defined in the VAT law.
Under RCM you record both output VAT and, where eligible, matching input VAT on the same return. For fully recoverable purchases this nets to zero VAT payable, but it must still be reported correctly.
Many businesses buy software, consulting or digital services from abroad. These often fall under RCM, and failing to report them is a common compliance gap that can trigger corrections or penalties.
Reverse charge transactions are reported in specific fields of the VAT return for both output and input VAT. Correct, consistent reporting is essential to keep filings accurate.
Yes. Exiloz identifies your reverse-charge purchases, configures your software to capture them, and ensures they are reported correctly on every VAT return.
Exiloz can make sure reverse charge VAT on your imports is captured and reported correctly, keeping your VAT returns accurate and audit-ready.
