VAT impacts most business services in the UAE.
Manpower supply is no exception.
If you work with a manpower supply company in Dubai, understanding VAT is essential for cost planning and compliance.
This guide explains how VAT applies to staffing and labour supply services.
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Understanding VAT on Manpower Supply Services
Manpower supply services fall under taxable business services in the UAE.
This includes:
Contract staffing
Temporary labour supply
Outsourced workforce
Skilled and unskilled labour services
When a manpower supply company in Dubai provides workers to another business, it is treated as a service transaction.
Under UAE VAT law, most service-based business activities are subject to 5% VAT.
This applies whether the manpower is supplied:
Short-term
Project-based
Long-term
The key point is simple.
If one business supplies workers to another for a fee, VAT generally applies.
This is different from direct employment where VAT is not involved.
What Counts as Manpower Supply Under UAE VAT Law
The following are treated as manpower supply:
Labour outsourcing
Contract staffing
Technical workforce supply
Administrative staff outsourcing
On-site support staff
However, employee salary reimbursement within the same legal entity is not manpower supply.
The distinction matters.
Because VAT applies only when a service is supplied between separate entities.
VAT Rate for Manpower Supply in UAE
Manpower supply services are subject to the standard VAT rate.
That rate is:
5%
This applies to:
Labour charges
Service fees
Management fees
The full invoice value is taxable.
Standard Rated vs Exempt Services
Manpower supply is not VAT exempt.
It is also not zero-rated.
It is a standard-rated service.
So:
VAT must be charged on invoices.
Businesses receiving staffing services can recover VAT if they are registered.
When Should a Manpower Supply Company Charge VAT?
A manpower supply company must charge VAT when:
It is VAT registered
Its taxable supplies exceed AED 375,000 annually
Once registered, VAT must be added to invoices.
Failure to do so may lead to penalties.
Businesses hiring manpower should confirm the supplier’s VAT status.
Role of VAT Registration
VAT applies only if the supplier is registered.
Unregistered suppliers cannot charge VAT.
Registered companies must:
Add VAT to invoices
File VAT returns
Maintain records
This is why working with a compliant manpower supply company in Dubai is important.
VAT is calculated on the total service value.
Example:
Service Fee: AED 10,000
VAT (5%): AED 500
Total Payable: AED 10,500
VAT applies to:
Wages charged to client
Admin fees
Service margins
Businesses can simplify calculations using a UAE VAT calculator.
This helps avoid errors in budgeting and invoicing.
Key Compliance Requirements for Businesses
Businesses receiving manpower services must:
Ensure supplier is VAT registered
Verify tax invoice format
Record VAT paid
This supports VAT recovery.
VAT Invoicing Rules
A valid VAT invoice must include:
TRN number
VAT amount
Service description
Invoice date
Without these details, VAT recovery may be denied.
Final Thoughts for Businesses Using Staffing Services
VAT applies to manpower supply services in most cases.
Understanding this helps businesses:
Plan costs
Avoid compliance risks
Improve financial accuracy
Before engaging staffing services, confirm VAT treatment.
Use tools like a UAE VAT calculator.
And work with a reliable manpower supply company in Dubai for smooth operations.