In brief
On 31 May 2024, the Federal Tax Authority in UAE (FTA) published VAT Public Clarification Number (38) (the ‘Clarification’) clarifying the FTA’s position on the difference between Manpower services and Visa facilitation services as well as determining the valuation of these services for Value Added Tax (‘VAT’) purposes.
Summary of the Public Clarification Number (38) on the application and conditions of Manpower versus Visa facilitation services
1. Manpower services include the identification, recruitment, and hire of candidates by an employer, and subsequently making such employees available to work for any other entity.
2. Under this scenario, the supplier (the employer) is responsible for all employment obligations, including the payment of salaries and other benefits, as well as the supervision and control of employees.
1. Visa facilitation services include administrative services of facilitating the employment visa process for employees hired by another entity.
2. All of the following requirements should be met in order for the services to be of a Visa facilitation nature (otherwise they would be of Manpower nature):
- the facilitator and the customer are part of the same corporate group (but not part of the same VAT group).
- the facilitator’s business activities do not include the supply of Manpower services.
- the facilitator is not responsible for any of the obligations related to the employee. However, the facilitator’s obligations will be limited to incurring the costs relating to obtaining the employment visa.
- the facilitator sponsors the employees to exclusively work for, and under the supervision and control of the customer.
1. If the services are of Manpower nature, the value of supply (consideration less VAT, where applicable) would be the full amount received by the employer including the employees' salaries, other benefits and any additional amounts charged.
2. On the other hand, if the services are of Visa facilitation nature, the value of supply would only include the amount charged for the services (recharges of visa services, typing fees, etc.). However, under this scenario the value of supply excludes the employees' salaries and other benefits.
1. The Clarification made a reference to the special value of supply rules between related parties as well as the value of supply rules for services provided for no consideration, and the importance of its application on the visa facilitation services.
2. The Clarification provides for various examples that could guide the taxpayers in their determinations of the nature of services provided, and the valuation thereafter.
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