Under Normal situation, Value Added Tax is to be charged, collected and paid to the government by the supplier of taxable goods or services and the process is termed as forward charge mechanism. Whereas Reverse Charge Mechanism or abbreviated as Reverse Charge Mechanism shifts the responsibility of tax payment to the Buyer, Recipient of goods and services.
When Reverse Charge Mechanism applies?
Under UAE Value Added Tax (VAT) Law Reverse Charge Mechanism applies in specific cases. As per Article 48 of Value Added Tax Law, the Reverse Charge Mechanism is applicable when
• A Taxable Person Imports Concerned Goods or Concerned Services for the purposes of his Business
• A Taxable Supply of any crude or refined oil, unprocessed or processed natural gas, or any hydrocarbons, and the Recipient of these Goods intends to either resell the purchased Goods as crude or refined oil, unprocessed or processed natural gas, or any hydrocarbons, or use these Goods to produce or distribute any form of energy Reverse Charge Mechanism applies. In all the above cases specific conditions mentioned in the Decree-Law and VAT Executive Regulations should be adhered to be liable for reverse charge under VAT.
