UAE VAT Public Clarification (VATP038) on Manpower vs Visa Facilitation Services

Federal Tax Authority has issued much awaited Public Clarification on 31.05.2024 offering guidelines on the Taxability of manpower supply services and Visa facilitation services. The clarification provides guidance on the differential of manpower supply services and Visa facilitation services.

Manpower Services: A supply qualifies as manpower supply services if it meets all the following conditions:

1. Employee identification, hiring, recruitment and availability of the employee is determined by the supplier.
2. The supervision and control of the employee always lies with the supplier.
3. The supplier is accountable for the performance of the employee's role at the customer's location.
4. The supplier has complete control over defining the nature of the employee's work and working hours.
5. The supplier can direct and guide the employee to diligently fulfill their duties.

VAT Treatment: The supply of Manpower services will be considered as Taxable supply.

Value of Supply: The consideration will include employees' salaries, benefits, any additional charges, and other recharges related to the provision of manpower services irrespective of whether the employees’ salaries and benefits are paid by the supplier or the employer.

Visa Facilitation Services: As an exception to the above, a supply will be considered visa facilitation services rather than manpower supply services if all the following requirements are met.

1. Employee identification, hiring, recruitment and availability of the employee is determined by the customer.
2. The employment visa holder ("Facilitator") and the customer are part of the same corporate group (Explained below).
3. The facilitator is not engaged in manpower supply services.
4. The facilitator is not responsible for any of the obligations related to the employee.
5. The employee is exclusively under the supervision and control of the customer.

Corporate Group: Two or more persons shall be considered as a part of same corporate group if they are associated with each other in following practices:

• Economic practices
• Financial practices
• Regulatory practices

Corporate Group should not be linked with VAT Tax Group or Corporate Tax Group.

VAT Treatment: The provider of Visa Facilitation services applies VAT to the Service fee charged by facilitator from customer.

Value of Supply: The consideration for the supply of visa facilitation services is the recharge of expenses such as typing fees, medical tests and issuance of employee Emirates IDs. The consideration excludes the employee’s salary, annual flight allowance and any other monetary benefits, as these are the obligation of the Customer.

Additional points to remember:

• VATP038 is a clarification document, not new legislation. It merely provides a clearer interpretation of existing VAT laws.
• The clarification will be considered effective from the date the relevant VAT legislation was originally implemented.