On 31 May 2024, the FTA in the UAE published VAT Public Clarification VATP038 regarding the VAT treatment of manpower and visa facilitation services. The clarification addresses challenges faced by companies in classifying transactions involving employment visas and determining the consideration for VAT purposes. It provides guidelines and examples for determining the nature of these supplies and applying relevant valuation rules.
Background:
In some cases, employment visas are held by one entity while the employees work under the supervision of another entity. Companies have faced challenges in determining the nature of the supply (i.e., whether it is a supply of manpower or visa facilitation services) and the value of the supply for VAT purposes, especially between entities within the same corporate group.
Manpower services:
Manpower services involve identifying, recruiting, and providing employees to another entity, including hiring candidates and making them available to work. The employer (supplier) is responsible for fulfilling all employment obligations and controlling the employees’ work. This is generally considered a taxable supply for VAT purposes. The consideration for the supply includes the full amount received by the employer from the other entity on which VAT should be accounted.
Source Deloitte
