Reverse Charge Mechanism in VAT Its application in UAE, KSA, Oman and Bahrain

Reverse Charge Mechanism in VAT and Its application in UAE, KSA, Oman, and Bahrain

Though VAT is implemented in GCC countries based on the common VAT agreement of 2016, there are differences in tax reporting requirements and procedures related to Reverse Charge Mechanism in various VAT implemented countries namely the United Arab Emirates, Kingdom of Saudi Arabia, Sultanate of Oman, and the Kingdom of Bahrain. The idea is to shed light on the businesses that are associated with multiple or any of these countries and to understand the legal and compliance requirements to be met as per the law.

There were many new procedures that came along with the implementation of VAT and one of the most widely used practices is the requirement of the Reverse Charge Mechanism, its liability, and reporting.

What is Reverse Charge Mechanism?

VAT is always a liability of the supplier: the collection from the customer and remittance with the government – which is why it is also known as the forward charge mechanism. But in very few scenarios the liability shifts from the supplier to the customer, and this shift of liability and responsibility is called the Reverse Charge Mechanism.

Let us understand what are the supplies in different VAT implemented GCC countries where RCM is applicable-

RCM applicable transactions

UAE

KSA

Bahrain

Oman

Import of goods

Import of services

Purchase of goods from Designated zone

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