June 2024 / United Arab Emirates

June 4 2024

UAE Federal Tax Authority Issues Clarification on VAT Treatment of Manpower and Visa Facilitation Services

The Federal Tax Authority (FTA) has issued a clarification regarding the distinction between the VAT implications of labour services and facilitation services (VATP038). The clarification states that the identification, recruitment and hiring of candidates, as well as their placement with other companies, can generally be considered as labour services. The total amount received (or expected) by the employer from the service recipient, such as wages and benefits, should be considered when considering these services. However, in certain circumstances, labour services may be visa facilitation services. The following conditions must be met for this to be the case:

  • the employment visa holder ("facilitator") and the customer are part of the same corporate group but are not part of the same tax group in the sense of the VAT legislation and the corporate tax legislation;
  • the facilitator's business activities do not include the supply of manpower;
  • the facilitator is not responsible for any of the obligations related to the employee; and
  • the facilitator sponsors these employees to exclusively work for and under the supervision and control of the customer.

The consideration for visa facilitation services includes any amount charged for processing visas for natural persons employed by another person, such as the visa fee.

The clarification regarding the VAT treatment for manpower and visa facilitation services, issued by the FTA, was published on 31 May 2024.

Source: IBFD tax research platform news