VAT: Should UAE firms issue tax invoices to themselves for imports?

UAE businesses — both on the free zone and mainland — seem to have been caught off-guard by a recent clarification on VAT. Are they required to issue tax invoices to themselves for each import of goods and services?

- BY PANKAJ S. JAIN Special to Gulf News

A recent public clarification (VATP041) — replacing the earlier VATP036 — discusses the import of SWIFT services by UAE financial institutions and accounting for VAT thereon, referred to as 'reverse charge mechanism' (RCM).

UAE financial institutions are treated as making a taxable supply of such SWIFT services to itself. VATP041 has clarified that these entities — being responsible for all applicable VAT obligations under RCM — are otherwise required to issue a valid tax invoice to itself for each SWIFT transaction. Conditional exceptions have been provided.

A recent amendment in VAT executive regulations prescribes that a 'simplified' tax invoice — instead of a 'full' tax invoice — cannot be issued where RCM applies in accordance with Art. 48 of the VAT Decree Law.

However, Art. 48 also covers import of goods and services under RCM. Considering VATP041, a question has arisen if all UAE businesses are obliged to issue tax invoices to itself for each import of goods and services under RCM?