Do I Charge VAT When I Recharge Expenses to a Client?
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Almost always yes, and the test is simpler than it sounds: whose name is on the supplier's invoice.
If it is yours, you bought the thing and are selling it on. That is a reimbursement, it forms part of what you are charging for, and VAT applies. If it is your client's name and you merely paid on their behalf, that is a disbursement and it falls outside VAT.
For most freelancers and small businesses, almost every recharge is the first kind.
This is general guidance, not tax advice. For your situation, check the UAE Federal Tax Authority (FTA) or a qualified tax advisor.
Quick answers
The difference in one table
| Criterion | Reimbursement | Disbursement |
|---|---|---|
| Whose name is on the supplier invoice | Yours | Your client's |
| Who is legally obliged to pay the supplier | You | Your client |
| Who received the goods or service | You | Your client |
| Can you add a markup | Yes | No — exact cost only |
| VAT on the recharge | Yes, at the rate of your main supply | None, outside scope |
| Can you reclaim the input VAT | Yes | No |
Why almost everything is a reimbursement
Think about how the costs actually arise.
You book a flight to visit a client. The airline's confirmation is in your name. You buy software licences for a project. The invoice is in your name. You hire a photographer for a client's campaign and pay them. Their invoice is in your name.
In every case you contracted, you received the service, you owe the money. Passing the cost on is therefore part of what you are selling, not a payment you made as someone's agent.
A disbursement requires the supplier to have invoiced your client directly, with you simply settling it on their behalf and with their authorisation. That happens — a law firm paying a court fee, an agency settling a permit charge — but it is the exception, and it cannot be created after the fact by relabelling the line on your invoice.
The part that catches people
A reimbursement takes the VAT treatment of your main supply, regardless of what the original cost carried.
So if you recharge something that had no VAT on it — a government fee, an exempt cost, a supplier who is not registered — and your main supply is standard-rated, the recharge is standard-rated. You add 5% to a cost that did not have 5% on it.
This feels wrong and is not. You are not passing through a tax; you are charging your client for something as part of your service, and your service carries VAT.
The same logic runs the other way. If your main supply is zero-rated, the recharged expense is zero-rated too.
A markup settles the question
If you add anything at all to the cost, it is a reimbursement. A disbursement recovers the exact amount and nothing more.
This is worth knowing before you decide to round a figure up or add a small handling charge — the handling charge does not just get taxed, it changes the character of the whole line.
Showing it on the invoice
Recharged costs are ordinary invoice lines. Describe what they are, show the amount, and apply VAT as you would to anything else on the document.
There is no separate category for them and no special wording required. If you have a genuine disbursement, show it separately and make clear it is outside the scope of VAT, so the amount is not swept into the taxable total by mistake.
The input VAT side
On a reimbursement, the supplier's invoice is in your name, so the input VAT on it is yours to reclaim in the normal way. You reclaim what you paid and charge VAT on what you bill. The two are separate entries, not a netting exercise.
On a disbursement you reclaim nothing, because the expense was never yours. The input VAT belongs to your client, who holds an invoice in their own name.
What to do about it in practice
Decide the treatment when the cost arises rather than at invoicing time, because by then the supplier's invoice already says whose it is and the answer is fixed.
If you want a cost to be a genuine disbursement, arrange for the supplier to invoice your client directly before the work happens. If that is impractical — and it usually is — treat it as a reimbursement, charge VAT and reclaim the input VAT. That is the ordinary case, not a failure.
Where Fatura Go fits
Recharged costs go on the invoice as normal lines, with VAT applied per line, so a standard-rated recharge sits alongside your fee and a zero-rated one can be marked as such.
If you record the underlying cost as an expense, the input VAT side stays in the same place as the invoice that recharged it, which is what makes the two halves reconcilable at quarter end.
Frequently asked questions
Do I charge VAT when I bill a client for expenses in the UAE?
Usually yes. If the supplier's invoice is in your name, the recharge is a reimbursement and forms part of your supply, so VAT applies at the rate of your main supply.
What is the difference between a reimbursement and a disbursement?
A reimbursement recovers a cost you incurred yourself, as principal, and is subject to VAT. A disbursement recovers a payment you made on your client's behalf, as their agent, and falls outside VAT.
Do I charge VAT on a cost that had no VAT on it?
If it is a reimbursement, yes. The recharge takes the treatment of your main supply, not the treatment of the original cost.
Can I add a markup to a disbursement?
No. Recovering anything more than the exact amount makes it a reimbursement.
Do I charge VAT on travel I bill to a client?
If the ticket was booked in your name, yes — it is a reimbursement and takes the rate of your main supply.
Can I reclaim the VAT on an expense I recharge?
On a reimbursement, yes, because the supplier's invoice is in your name. On a disbursement, no, because the expense was never yours.
How do I make something a genuine disbursement?
Have the supplier invoice your client directly, with your client legally liable and having authorised you to pay. It has to be arranged before the fact, not relabelled afterwards.