A recruitment agency in the UAE charges 5% VAT on its placement and recruitment fees, treats staff seconded to a client under the client's direction as a supply of staff taxed at 5% on the full consideration — including any wages reimbursed — and generally falls outside UAE VAT scope when supplying services to a business resident outside the UAE. Mandatory VAT registration applies once taxable turnover exceeds AED 375,000 in 12 months, and the registration penalty for missing it is AED 10,000. This guide sets out the 2026 rules agency owners actually get wrong: which income is taxed, when secondments trigger VAT, and how to recover input tax cleanly.
Which agency income carries VAT
Under Federal Decree-Law No. 8 of 2017 and its Executive Regulation (Cabinet Decision No. 52 of 2017), the main agency revenue streams fall out like this:
| Revenue stream | VAT treatment | Basis |
|---|---|---|
| Permanent placement fee (charged to the client) | Standard rate — 5% | Taxable supply of services to a UAE recipient |
| Temporary / contract staffing — staff work under the client's direction and control | Supply of staff — 5% on the full consideration, including wages reimbursed by the client | Article 34, Executive Regulation |
| Services to a business resident outside the UAE | Generally outside the scope of UAE VAT | Place-of-supply rules, Federal Decree-Law No. 8 of 2017 |
| Payroll processing, HR consulting, CV screening sold separately | Standard rate — 5% | Taxable supply of services |
The secondment row is where agencies under-report. Where your staff work under the client's direction and supervision, Article 34 of the Executive Regulation treats the arrangement as a supply of staff, and the consideration includes the amounts charged for the employees' wages. The practical effect: VAT at 5% applies to the whole invoice, not just the agency margin — invoicing only the margin on secondments is the most common VAT error in this sector.
Registration thresholds and deadlines
- Mandatory registration: within 30 days of taxable turnover exceeding AED 375,000 over the past 12 months (or where it is expected to exceed that in the next 30 days) — per Article 50 of Federal Decree-Law No. 8 of 2017 and the FTA's VAT registration guidance.
- Voluntary registration: available from AED 187,500 — often worth electing for an agency with UAE clients, because placement fees to VAT-registered clients carry recoverable input tax with no net cost to the client.
- Late registration penalty: AED 10,000.
- Returns and payment: due within 28 days of the end of each tax period.
An agency whose revenue is mostly out-of-scope (overseas clients) counts only taxable supplies toward the AED 375,000 threshold — out-of-scope turnover does not force registration, which is why the split matters in your revenue coding.
Input tax: what an agency can and cannot recover
Rent, software, marketing, licensing and professional fees connected to making taxable supplies are recoverable in full. Two watch-outs specific to agencies:
- Wages of seconded staff are not input tax — salaries carry no VAT, so there is nothing to recover; the VAT point is the output tax on the secondment invoice, not the wage bill.
- Out-of-scope revenue dilutes recovery — if a meaningful share of services is supplied to overseas recipients (outside the scope of UAE VAT), input tax attributable to that revenue is not recoverable, and you need a defensible recovery percentage method.
From 1 October 2026, FTA Decision No. 13 of 2026 adds supplier-verification duties before input tax is deducted — for an agency this mostly means keeping supplier TRN and invoice checks on file for rent, software and subcontracted HR services.
Invoicing rules that keep secondments clean
For each supply-of-staff invoice, show the service period, the staff roles, the full consideration including wages, and VAT at 5% separately. Keep the client's signed secondment agreement evidencing direction and control — the FTA relies on it to distinguish a supply of staff (Article 34) from an ordinary service contract, and the treatment changes the taxable amount.
Frequently asked questions
Do placement fees to overseas clients carry UAE VAT? Generally no — where the recipient of services resides outside the UAE and you are a UAE-based agency, the place of supply rules take the supply outside UAE VAT scope. The client's residence and establishment decide it, so evidence the client's status.
Is VAT due on the full secondment invoice or just my margin? The full consideration — where Article 34 applies, the consideration includes the wages reimbursed by the client, all taxed at 5%.
When must an agency register for VAT? Within 30 days of taxable turnover exceeding AED 375,000 in 12 months; voluntary registration is available from AED 187,500.
Can the agency recover VAT on recruitment advertising? Yes, where the advertising connects to taxable supplies. Input tax linked to out-of-scope overseas revenue is not recoverable.
Reviewed by Gautam Sanoj, Senior Tax Advisor, Finanshels — last reviewed 2 October 2026. VAT treatments reflect Federal Decree-Law No. 8 of 2017 and Cabinet Decision No. 52 of 2017 as in force for 2026; confirm sector-specific positions with a registered tax agency.
