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Key Takeaways
- Manpower services (you're supplying staff): VAT is charged on the full amount the other company pays you, including the employee's salary and benefits, even if that company pays the salary directly.
- Visa facilitation services (you're just handling the sponsorship paperwork): VAT is charged only on your admin fee, not on the salary passed through.
Why this Distinction Matters
In the UAE, it's common, especially within a group of companies, for one entity to hold the employment visas for staff who actually work at, and take instructions from, a different entity in the same group. It's easier administratively, or one company already has the trade license and quota to sponsor visas.
The problem is that, from a VAT perspective, this arrangement can be read in two completely different ways, and each carries a very different tax liability:
- You're supplying labour to the other company (a manpower service), or
- You're just helping that company sponsor visas for people who are, in every practical sense, already their employees (a visa facilitation service).
The FTA addressed this exact issue in VAT Public Clarification VATP038, because many businesses were unintentionally under-declaring VAT by treating full-blown staff secondment as a simple visa administration fee.
Manpower Services vs Visa Facilitation Services
The core test: who controls the employee?
The FTA's starting point is simple: whoever supervises and controls an employee's day-to-day work is treated as that employee's real employer for VAT purposes, regardless of which company's name appears on the labour card or visa.
Supervision and control means deciding:
- Where the employee works
- What tasks they're assigned
- How their performance is evaluated, and
- Their working hours and day-to-day direction
Manpower services (the default position)
As a general rule, if Company A finds, hires, and makes staff available to work for Company B, this is a taxable supply of manpower services. It doesn't matter whether Company B pays the salaries directly to the employees or reimburses Company A for them.
Visa facilitation services (the narrow exception)
Visa facilitation services are treated differently, but only in a very specific set of circumstances. A supply is only a visa facilitation service (not a manpower service) if all four of the following conditions are met:
- Same corporate group, different VAT tax group — The company sponsoring the visa (the "Facilitator") and the company the employee actually works for (the "Customer") must belong to the same corporate group (common ownership, shared commercial objectives), but must not be registered together as a single VAT tax group.
- The Facilitator isn't in the manpower business — If the Facilitator supplies staffing/manpower services to anyone else (even outside the group), it can't claim this exception for any of its dealings, including with group companies.
- The Facilitator carries none of the employment obligations — Salaries, benefits, insurance, and housing allowances must all be borne by the Customer, not the Facilitator. If the Facilitator pays any of these, the exception fails.
- The employee works exclusively for, and is supervised exclusively by, the Customer — No dual reporting lines, no shared HR function across the group.
If even one of these four conditions isn't met, the supply defaults back to being treated as a manpower service, with VAT due on the full value, not just an admin fee.
Working Out the VAT Value
Value of supply — Manpower services
Where the supply is genuine manpower, the value on which VAT is charged includes:
- The employee's full salary and benefits
- Any recharges for costs the supplier incurred
- Any margin or additional fee charged on top
Example: Company A sponsors the visas for staff working at Company B. Company A is the supplier of manpower services to Company B, regardless of whether A or B actually pays the salaries. VAT is due on the entire amount B pays A for the arrangement (salaries, benefits, and any extra fee), not just A's margin.
Value of supply — Visa facilitation services
Where all four conditions above are genuinely met, VAT is only due on the facilitation fee itself — the amount charged for handling the visa process. This can include recharge of costs like:
- Typing/application fees
- Medical test fees
- Emirates ID (EID) issuance costs
It excludes the employee's salary, annual flight allowance, and other monetary benefits, because those remain the Customer's own obligation, not a cost the Facilitator is passing on for a service.
Example: Company A holds the visas for staff at Company B (same corporate group). Company A's role is limited to arranging visa issuance, medical tests, and EID processing. Company B hires the staff directly, pays their salaries, and supervises them. As long as Company A doesn't run a centralised HR function for the wider group, this qualifies as visa facilitation. VAT applies only to Company A's facilitation fee.
Special Valuation Rules
Because visa facilitation only ever happens between related companies, two special valuation rules can override the price you've actually agreed.
1. Related-party pricing below market value
Since a visa facilitation arrangement is, by definition, between related companies, the FTA applies a related-party valuation rule if the facilitation fee charged is below market rate.
- If the Facilitator charges less than market value, and the Customer cannot recover input VAT in full, then VAT must be calculated on the market value of the service, not the (lower) amount actually invoiced.
- If the fee charged already equals market value, this rule doesn't apply. VAT simply applies to the amount actually charged.
In practice: If your Customer can't fully recover VAT (for example, because it makes exempt supplies), charging a token or below-market visa admin fee within the group won't reduce your VAT exposure. The FTA will still expect VAT on the market rate.
2. No fee charged at all — deemed supply rules
If the Facilitator handles the visa process for free, this can trigger the deemed supply rules, which treat the service as if it had been supplied for consideration and require VAT to be accounted for regardless.
- Exception — If the Facilitator did not recover any input VAT on the costs of providing the service (both direct costs like typing and medical fees, and indirect/overhead costs), the arrangement falls outside the scope of VAT entirely. No deemed supply arises.
- If the Facilitator did recover input VAT on those costs, it must account for output VAT based on the total cost incurred to provide the service (direct and indirect costs combined).
- If the exact cost can't be calculated, the market value of similar services can be used instead as a reasonable proxy.
A Simple Way to Self-Check Your Arrangement
Ask yourself these questions about any visa-sponsorship-across-group-companies setup:
- Are the two companies part of the same corporate group but not the same VAT tax group?
- Does the visa-holding company avoid supplying manpower to anyone else?
- Does the visa-holding company avoid paying salary, benefits, insurance, or housing for the employee?
- Does the employee work exclusively for, and report only to, the other company?
If yes to all, you likely have a visa facilitation arrangement. VAT applies only to your admin fee.
If any answer is no, you likely have a manpower supply. VAT applies to the full value, salaries included.
A Note on Tax Groups
If the visa-holding company and the employing company are registered together as a single VAT tax group, this entire analysis becomes irrelevant for VAT purposes. Transactions between members of the same tax group are disregarded, so no supply (manpower or facilitation) is considered to take place between them at all. The activity simply falls outside the scope of VAT.
A corporate group (common ownership, shared commercial objectives) and a tax group (formal FTA registration as a single taxable person) are not the same thing. A group of companies can be commercially related without being a VAT tax group, and this distinction is exactly what makes the visa facilitation exception possible in the first place.
Frequently Asked Questions
This guide reflects UAE VAT legislation as consolidated through Federal Decree-Law No. 16 of 2025 (effective 1 January 2026) and Cabinet Decision No. 100 of 2025 (effective 29 September 2025), and is based on FTA Public Clarification VATP038. This guide is for general informational purposes and does not constitute tax advice for your specific circumstances. For advice specific to your situation, please contact our team.
