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Frequently Asked Questions on VAT

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How is the domestic reverse charge mechanism applicable in the state?

Let us assume that a registered business makes a taxable supply of concerned goods, like crude or refined oil, processed or unprocessed natural gas, hydrocarbons, or gold and diamonds to another registered business in the UAE. When the recipient of these goods either sells them in the same form or distributes them as any other form of energy, then the following rules will apply:

  1. The supplier should not charge VAT on the supply of the above-mentioned goods.
  2. The recipient will have to calculate the VAT applicable on the value of goods, will be responsible for all tax obligations, and should also calculate the due tax.

The recipient of the goods should provide the supplier a written statement saying that it is a registered business. The supplier does not need to calculate tax on the supply, unless the supplier is aware that the recipient is not actually registered. If the recipient is not registered on the date of supply and the supplier is aware of that fact, they will both be liable for the tax and any associated penalties.

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