Retention money and VAT: when is the tax really due

2026-08-26
Retention money and VAT: when is the tax really due

VAT & Construction

Retention Money and VAT:
When Is the Tax Really Due?

On construction and other long-term contracts, the client holds back a portion of each payment as retention, usually released about a year after the work is finished. It is easy to assume the VAT on that money waits until it is released. Under the UAE date of supply rule in Article 26, it often does not: the tax can fall due on the full certified value, including the retention, before the cash reaches you. This short video explains the rule and what it means for your cash flow.

Article 26
UAE date of supply rule
Full Certified Value
Retention may still form part of the taxable value
Cash Flow
VAT may become due before the retention is received

Watch the short video
Watch time: [3 min 43 sec]

Related Blogs

Frequently Asked QuestionsYour Top Queries Answered

AUTHOR BIO
Mr. Hemant Mundhra

With over 25 years in Dubai and nearly 30 years as a Chartered and Management Accountant, Hemant has extensive experience across manufacturing, services and technology sectors. He has worked with major corporate groups including Al Tayer, Saif Al Ghurair, Dhabi, and Aditya Birla. Hemant specializes in profitability and cost management, debt restructuring, contract management, and regulatory compliance, having generated approximately USD 47.5 million in savings and profit growth. A confident public speaker and Distinguished Communicator, he lives by the quote: “You get what you reward for. If you want ants to come, you put sugar on the floor” (Charlie Munger), embodying his belief that “Profit has its own intelligence.”

Our Services
Chat on WhatsApp
×

test