VAT Without the Headache: From Dubai to Dublin - How Reverse Charge Works in Dynamics 365 Business Central

Reverse Charge VAT in Dynamics 365 Business Central:

Setup Guide for UAE and Beyond

Navigating VAT regulations can feel overwhelming especially when dealing with reverse charge rules across different countries. Whether you're managing construction contracts in Dubai or software sales in Europe, understanding how reverse charge VAT works is essential for compliance and efficiency. In this guide, we break down real-world scenarios from UAE domestic transactions to international B2B services and show you exactly how to implement reverse charge VAT in Microsoft Dynamics 365 Business Central. No jargon, no confusion just practical insights and setup tips that make VAT management seamless.

This post walks through real-world scenarios both domestic and international and shows how to configure each in Microsoft Dynamics 365 Business Central, with a special focus on UAE compliance.

What Is Reverse Charge VAT?

Reverse Charge VAT flips the usual tax process: instead of the seller charging VAT, the buyer accounts for it. This is common in:

• Cross-border B2B services
• High-risk domestic sectors (e.g., construction, electronics)
• Intercompany transactions
• Imports and intra-GCC trade

 

UAE Domestic Scenarios

Construction Services

Scenario: A subcontractor in Dubai invoices a main contractor without VAT.

Business Central Setup:

• Assign VAT Business Posting Group for domestic buyers.
• Use VAT Product Posting Group for construction services.
• In VAT Posting Setup, define reverse charge VAT % and GL accounts.
• On the purchase invoice, Business Central calculates VAT and posts it to the buyer’s VAT account.
• Use bilingual invoice templates (Arabic & English) to comply with FTA rules.

 

High-Risk Goods (Electronics, Metals)

Scenario: A UAE wholesaler sells mobile phones to a VAT-registered retailer.

Business Central Setup:

• Create a VAT Product Posting Group for high-risk goods.
• Assign a Reverse Charge VAT Calculation Type in VAT Posting Setup.
• Buyer’s purchase invoice triggers VAT self-assessment.
• Use country-specific print layouts to show VAT summary clearly.

International Scenarios

EU to EU – Software Sale

Scenario: French SaaS company sells to Estonian agency.

Business Central Setup:

• Assign VAT Business Posting Group for EU customers.
• Use VAT Product Posting Group for digital services.
• In VAT Posting Setup, define reverse charge logic for intra-community services.
• On the sales invoice, VAT is not charged; buyer self-assesses.

 

Non-EU to EU – Advisory Services

Scenario: US firm advises German company.

Business Central Setup:

• Use VAT Business Posting Group for non-EU vendors.
• Define reverse charge in VAT Posting Setup.
• Buyer posts VAT via purchase invoice; no VAT charged by seller.

UK Post-Brexit – Import Services

Scenario: Polish firm invoices UK client.

Business Central Setup:

• Assign UK-specific VAT Business Posting Group.
• Configure reverse charge VAT % in VAT Posting Setup.
• Buyer posts VAT on purchase invoice. 

UK Domestic Reverse Charge – Construction Industry Scheme (CIS)

Scenario: UK subcontractor refurbishes a commercial building for a main contractor.

Business Central Setup:

• Use VAT Business Posting Group for UK domestic buyers.
• Assign VAT Product Posting Group for CIS services.
• In VAT Posting Setup, define reverse charge VAT % and GL accounts.
• On the purchase invoice, VAT is calculated and posted by buyer.

 

Intercompany Transactions (e.g., LegatEntity1 DMCC → LegalEntity2 DMCC)

Scenario: Freight services between two UAE entities.

Business Central Setup:

• Create VAT Business Posting Group as “Intercompany”.
• Tag intercompany accounts with this group to exempt VAT.
• Use Intercompany Journals to post entries across companies.
• VAT is not charged; transactions are recorded cleanly.

 

Key Features in Business Central for UAE VAT Compliance

VAT Reverse Charge Mechanism

Automatically applies correct VAT treatment for imports and cross-border services.

VAT Return Declaration

Generates FTA-compliant reports for direct upload to the e-Tax portal.

FTA VAT Audit File (FAF)

Exports audit file in CSV format for inspections.

Bilingual Invoices

Arabic & English templates for sales invoices and credit notes.

Country-Specific Print Layouts

Enhanced invoice formats with VAT summary columns.

Simplified VAT Setup

Intuitive interface for VAT codes, rates, and reporting schedules.

 

Final Thoughts

Reverse Charge VAT isn’t just a tax rule it’s a strategic tool for compliance and efficiency. With Dynamics 365 Business Central, businesses in the UAE and globally can automate VAT processes, reduce errors, and stay audit-ready.

Whether you're handling domestic construction contracts or cross-border SaaS sales, Business Central’s built-in VAT features combined with its cloud flexibility and Power BI integration make it a powerful ally in your financial operations.