VAT Reverse Charge in the UAE: The 2026 Rules and Every Category

The VAT reverse charge in the UAE has changed more in the last two years than at any time since VAT began. Self-invoicing on imports has been removed, a five-year limit now applies to excess input tax, and metal scrap has joined the list of domestic reverse charge supplies. This guide brings every reverse charge category in force into one place, with the 2026 changes explained.

What the reverse charge mechanism does

Under the reverse charge mechanism (RCM), the buyer accounts for VAT instead of the supplier. The buyer reports output VAT on the purchase and, if entitled, recovers the same amount as input tax in the same return. For a fully taxable business the net cash effect is usually zero, but mistakes still lead to penalties and lost input tax.

The UAE standard VAT rate is 5%. Businesses must register once taxable supplies and imports exceed AED 375,000 a year, and may register voluntarily from AED 187,500.

What changed on 1 January 2026

Federal Decree-Law No. 16 of 2025 amended the VAT Law from 1 January 2026. Three changes affect reverse charge directly.

1. Self-invoicing is no longer required

Before 2026, businesses applying reverse charge on imported goods and services had to issue a self-invoice. That requirement has been removed. Instead, you must keep the supporting documents specified in the VAT Executive Regulation, such as the supplier's invoice and import records. Some advisers still recommend keeping an internal self-billing record where the supplier's documents are incomplete, because it helps support input tax recovery.

2. A five-year limit on excess input tax

Excess recoverable tax can now be carried forward or refunded only within five years from the end of the tax period in which it arose. There is a transition rule: where the five years have already passed, or will pass within one year of 1 January 2026, a refund can still be claimed until 31 December 2026. If you have old credit balances, act before the year ends.

3. Input tax can be denied in evasion chains

The FTA can now refuse input tax where a supply is part of a tax evasion arrangement and the buyer knew, or should have known. From 1 October 2026, FTA Decision No. 13 of 2026 sets out the supplier and transaction checks businesses should carry out before deducting input tax. Weak checks on suppliers in reverse charge sectors, such as metals and electronics, are an obvious risk.

Every reverse charge category in force

Precious metals and stones

Cabinet Decision No. 127 of 2024 widened the old gold and diamond rules. The domestic reverse charge now also covers silver, platinum and palladium, pearls, rubies, sapphires and emeralds, and jewellery where the precious metal or stone content outweighs everything else.

Electronic devices

The domestic reverse charge on electronic devices applies to mobile phones, smartphones, computers, tablets and their parts. It applies only between VAT registrants where the buyer intends to resell the devices or use them in manufacturing. The buyer must give a written declaration before the supply, and the supplier must check the buyer's VAT registration.

Metal scrap

The newest category. It applies where both parties are registered, the buyer will reuse, recycle or process the scrap, the buyer gives a written declaration, and the invoice states that reverse charge applies. Zero-rated scrap is excluded.

Step-by-step: getting reverse charge right

1. Map your supplies. List every import of services and goods, and every domestic purchase in the sectors above.
2. Collect declarations. For domestic RCM categories, get the buyer's written declaration before the supply and keep it on file.
3. Check invoices. Domestic RCM invoices should say that reverse charge applies and show the VAT amount the buyer must account for.
4. Report correctly. Record the output VAT and input tax in the right boxes of the same return.
5. Keep documents. Without self-invoices, the supplier's invoice, contracts, customs records and payment proof are your evidence.
6. Review supplier risk. Apply the FTA Decision No. 13 of 2026 checks, particularly for high-value metal and electronics suppliers.

Common reverse charge mistakes

• Applying domestic RCM without the buyer's written declaration.
• Charging 5% VAT on a supply that should be under domestic RCM, or the reverse.
• Missing reverse charge on cloud software and other services from foreign suppliers.
• Claiming input tax without keeping the documents that replaced self-invoices.
• Letting old excess input tax lapse after 31 December 2026.

Reverse charge and e-invoicing

With e-invoicing starting in 2027, domestic reverse charge invoices will move through your accredited service provider in structured form. Make sure your ERP tax codes distinguish standard-rated, zero-rated, exempt and reverse charge supplies before go-live.

How GULF CONSULT can help

GULF CONSULT's VAT team reviews reverse charge treatment, fixes ERP tax codes, prepares voluntary disclosures where errors are found and helps clients claim old refunds before the 31 December 2026 transition deadline.

Related services: VAT advisory, VAT refund deadline article, Accounting & bookkeeping.

Book your free consultation

Not sure your reverse charge entries are right, or have old credits to claim before year-end? Book GULF CONSULT's free 30-minute consultation. Email [email protected], call +971 58 600 4833 or message us on WhatsApp.