Reverse Charge Mechanism is a mechanism whereby responsibility of payment of VAT is on the buyer unlike forward charge where the responsibility is on the seller to discharge VAT. This mechanism of reverse charges is applicable on import of goods and services in UAE from rest of world. Further, both such transactions of goods and services are to reported separately in the VAT Return.

Reverse Charge Mechanism (RCM) requires the VAT registered person to account for the VAT due on import of goods and Services ie the recipient is required to account for the VAT payable on such imports (Box 3 and Box 6 of VAT201). The VAT payable reported in the VAT return can be recovered in Box 10 as Input claim provided the import in question is eligible for normal input recovery as per Law (Art 55 DL, Art 53 ER) whereby there would be no actual cash outflow/payment of VAT in most cases. Eg: if you import a trading item meant for resale the input can be claimed on the RCM recognised. However if you import a personal vehicle, you would be required to disclose output VAT due on the import but no input can be claimed since this is disallowed input as per Law. In such a case by not reporting the input in Box 10, it would increase your VAT liability in the return which you will submit and make payment.