Many of the tools a UAE business pays for every month are billed from outside the country: productivity suites, design apps, cloud hosting, video calls and online advertising. Their invoices usually show no UAE VAT. That doesn’t mean no VAT is due.
If your business is VAT registered, you account for 5% VAT on these subscriptions yourself, under the reverse charge. In most cases you recover the same amount in the same return, so the net cost is nil. The work is in reporting it correctly.
The short answer depends on your VAT status
| Your position | Who accounts for the 5% | What you do |
|---|---|---|
| VAT-registered business | You, under the reverse charge | Report the subscription in Box 3 and Box 10 of each VAT return and recover it as normal |
| Not registered, but sales and overseas purchases together exceed AED 375,000 in 12 months | You, once registered | Apply for VAT registration within 30 days of crossing the threshold |
| Not registered and under the threshold | No reverse charge applies | Any UAE VAT a platform charges you is a cost you can’t recover |
Why VAT applies when the supplier is overseas
Normally a service is supplied where the supplier is based (Article 29 of the VAT law). Business customers are an exception. When a UAE-resident business buys services from a supplier with no place of residence in the UAE, the place of supply is the UAE (Article 30).
Electronic services have their own rule too. Article 31 places them in the UAE to the extent they are used and enjoyed here. The Executive Regulation lists examples that include web hosting, the supply and updating of software, and advertising space on a website.
The overseas supplier doesn’t charge that VAT, so Article 48 shifts the duty to you, the registered buyer. You are treated as supplying the service to yourself, and you account for the tax in your own return. That is the reverse charge.
How to report an overseas subscription in your VAT return
- Download the invoice from the supplier’s billing page each time you’re charged. The Executive Regulation expects the supplier’s invoice, showing what was supplied and the amount paid.
- Find the date of supply. For subscriptions billed regularly, it is the earliest of the invoice date, the payment due date and the date you pay (Article 26). An annual plan paid upfront is reported in that period, not spread over 12 months.
- Convert the amount to dirhams at the UAE Central Bank rate for that date. The dirham is pegged to the US dollar at AED 3.6725.
- Report the value and the 5% VAT in Box 3 of the return, which covers supplies subject to the reverse charge.
- Report the value and the VAT you can recover in Box 10. For a business making only taxable supplies, Box 10 matches Box 3.
The FTA’s VAT returns user guide shows both boxes with examples, and the FTA’s page on filing VAT returns covers deadlines and payment.
A worked example
A design agency pays an overseas platform USD 500 a month for team licences. At AED 3.6725, that is AED 1,836.25.
| Return entry | Value (AED) | VAT (AED) |
|---|---|---|
| Box 3: supplies subject to the reverse charge | 1,836.25 | 91.81 |
| Box 10: the same supplies, input side | 1,836.25 | 91.81 |
| Net VAT payable on the subscription | 0.00 |
Over a year, each box carries AED 22,035 of value and AED 1,101.72 of VAT (12 monthly entries of AED 91.81). Nothing is paid, but leaving the entries out still makes the return incorrect.
What changed in 2026
No more self-invoice
Since 1 January 2026, Article 48 says you handle every VAT obligation on imported services “except for issuing a tax invoice to itself”. The FTA’s public clarification VATP046, published in September 2026 and listed on its guides and clarifications page, confirms the change. You still account for the VAT and keep the supporting documents.
New supplier checks
FTA Decision No. 13 of 2026 requires checks on suppliers and supplies before input VAT is deducted, from 1 October 2026. The decision doesn’t specifically address reverse-charge purchases, and some checks assume a UAE supplier, so don’t assume they fall outside it. Keep the contract, invoice and payment record for each overseas tool anyway. Our guide to mandatory supplier checks explains the thresholds.
Five-year time limits
Refund claims now have a five-year limit, and an excess input VAT credit lapses five years after the end of the period it arose in. Credits whose five years have already run out, or run out within a year, can still be claimed if you apply by 31 December 2026. If you miss the input side of a reverse charge, the law lets you claim it in the following tax period (Article 55).
When the reverse charge becomes a real cost
For a business that makes only taxable supplies, the reverse charge nets to zero. It becomes a cost in three situations.
- You also make exempt supplies, such as residential rent or some financial services. Box 3 still shows the full VAT, but Box 10 shows only the recoverable share. If you recover 60%, the agency above would claim AED 55.09 a month and absorb AED 36.72.
- The software is used for non-business purposes, so the VAT on that share can’t be recovered.
- You aren’t VAT registered and the platform charges you 5% UAE VAT. Without a TRN, you can’t recover it.
Our post on VAT exemption versus exception explains how exempt supplies affect recovery.
What if an overseas platform charges you UAE VAT?
Some overseas platforms register for UAE VAT so they can charge consumers. If your account has no TRN on it, they may charge your business the same 5%.
Fix it at the source. Add your TRN in the billing settings, ask the supplier for a credit note or a corrected invoice without VAT, then reverse-charge the subscription.
Don’t simply claim the VAT shown. A full tax invoice must show the buyer’s TRN, so an invoice without yours is weak support for an input claim.
Do overseas subscriptions count towards VAT registration?
Yes. The AED 375,000 mandatory registration threshold counts imports as well as sales. Article 19 of the VAT law includes services received from abroad that would fall under the reverse charge, and the FTA’s VAT registration page describes the test as taxable supplies and imports.
Take a consultancy with AED 300,000 of sales in the last 12 months. It also paid AED 90,000 for overseas software, cloud hosting and online advertising. Its total is AED 390,000, above the threshold, so it must apply to register within 30 days (Article 7 of the Executive Regulation). A business that registers late can still owe VAT for the period it should have been registered.
If you’re close to the line, add overseas spending to the test before deciding. VAT registration support starts with that calculation.
Is there withholding tax or Corporate Tax on the payment?
No withholding tax applies. The Corporate Tax law sets the withholding rate on payments to non-residents at 0% (Article 45), so you pay the full invoice and file nothing extra. Our withholding tax guide covers dividends, royalties and service fees.
For Corporate Tax, a subscription used for the business is normally a deductible expense under the usual rules.
Common mistakes
Reading “no VAT on the invoice” as “no VAT due”
An overseas supplier is right not to show UAE VAT. The VAT is yours to report.
Missing the small tools
A USD 15 plugin is reverse-charged the same way as a USD 5,000 contract. Pull a list of overseas card payments each quarter and match each one to an invoice.
Relying on card statements
A card line doesn’t show what was bought or who supplied it. Download the invoice when you pay; our guide to organising VAT paperwork has a filing routine.
Spreading an annual plan
VAT on an annual plan paid upfront belongs in the period of the date of supply, usually when you pay.
Paying on personal cards
Tools bought by staff on personal cards often carry the employee’s name, not the company’s. Move them to a company account so the invoice supports the claim.
How A&A can help with overseas subscriptions
We can build a reverse-charge schedule from your card and bank records, match each overseas payment to an invoice, and prepare the Box 3 and Box 10 entries every period. If past returns missed these entries, we work out whether a correction in a later return or a voluntary disclosure is needed.
See our VAT return filing and VAT advisory services, or talk to our VAT team.
Download the invoice, then report it
Overseas software is easy to miss because the invoices look VAT-free. Keep each supplier’s invoice, report the reverse charge in Boxes 3 and 10 every period, and count the spend towards the registration threshold if you aren’t registered yet.
Frequently Asked Questions
Do I pay VAT on online ads bought from an overseas platform?
Yes, if you’re VAT registered. Advertising space on a website is one of the electronic services named in the Executive Regulation, so it follows the same reverse charge rules as software.
Is reverse-charge VAT a cost to my business?
Usually not. If you make only taxable supplies, the VAT in Box 3 is recovered in Box 10 of the same return. It becomes a cost when you make exempt supplies or use the service for non-business purposes.
Do I still need to issue a self-invoice for the reverse charge?
No, not since 1 January 2026. Keep the supplier’s invoice and the payment record instead.
Which exchange rate should I use?
Use the UAE Central Bank rate for the date of supply. For US dollar invoices, the rate is fixed at AED 3.6725.
Which VAT return boxes are used for imported services?
Box 3 for the value and the VAT due, and Box 10 for the value and the VAT you can recover. Both go in the same return.
My business isn’t VAT registered. Does any of this apply?
The reverse charge doesn’t, and you can’t recover any UAE VAT a platform charges you. Your overseas purchases do count towards the AED 375,000 registration threshold, so keep a running total.
We never reverse-charged our past subscriptions. What now?
Work out the amounts period by period. Since 2026, some errors with no tax difference can be corrected in a later return. Others need a voluntary disclosure, with a penalty of 1% a month of the tax difference; for a fully taxable business that difference is usually nil. A VAT compliance review will show which route applies.
Is software bought from a UAE reseller treated differently?
Yes. A VAT-registered UAE reseller charges 5% VAT on a tax invoice. You recover it as normal input tax in Box 9, with no reverse charge.