Subscription billing is charging a customer a fixed amount on a repeating schedule, monthly or annually, for a service that continues until someone cancels: software, a maintenance plan, a gym or studio membership, managed IT support, or an agency package sold as a plan. In the UAE and Saudi Arabia each billing period is a separate taxable supply, so every period needs its own tax invoice within a fixed deadline, annual prepayments pull the whole year's VAT forward, and in Saudi Arabia every one of those invoices goes through Fatoora Phase 2 like any other. This guide covers the tax side period by period, then the operating side: trials, pauses, cancellations, card collection, failed payments, and the five metrics that tell you whether the business is growing.
Subscription, retainer or recurring invoice: which one is this?
The three terms overlap, and the difference matters mainly for how you sell and measure, not for VAT.
| Subscription | Retainer | Recurring invoice | |
|---|---|---|---|
| What the customer buys | A defined plan at a listed price | Capacity or a negotiated deliverable set | Whatever the invoice template says |
| Price set by | Your price list | Negotiation per client | Copied from the last invoice |
| Typical sellers | SaaS, gyms, maintenance, IT support | Agencies, PR, consultants | Anyone billing the same amount repeatedly |
| Changes mid-term | Upgrade, downgrade, pause, cancel | Scope review, renegotiation | Edit the template |
| Measured by | MRR, churn, NRR | Margin per client | Nothing, usually |
A recurring invoice is a mechanism. A subscription is a product with a price, a lifecycle and metrics. If you run agency retainers, the commercial and invoicing detail is covered in retainer vs project pricing and invoicing agency retainers and milestones. This post is for businesses that sell plans.
When is VAT due on each subscription period in the UAE?
The UAE has a specific rule for contracts with periodic payments or consecutive invoices. Under Article 26 of Federal Decree-Law No. 8 of 2017 on VAT, as amended from 1 January 2023, the date of supply for each period is the earliest of:
- the date the tax invoice is issued;
- the date payment is due as shown on the tax invoice;
- the date payment is received; or
- one year after the goods or services were provided.
The fourth item is a backstop: a supply you never invoice and never collect for still becomes taxable after a year. For a normal subscription the first three decide it, and in practice whichever of invoice or payment happens first sets the tax point.
The tax invoice itself must be issued within 14 days of the date of supply (Article 67). Since 14 April 2026, Cabinet Decision No. 129 of 2025 sets a penalty of AED 2,500 per case for failing to issue a tax invoice or tax credit note on time. A subscription business issues hundreds of invoices a year, so a broken billing run is not one mistake in that framework.
Deadline: UAE: each period's tax invoice within 14 days of its date of supply. If a card charge lands before you have issued the invoice, the payment date is the date of supply and the 14 days start there.
The practical rule: generate the invoice on the first day of each period, dated that day, and collect against it. Invoice and tax point then match, and the VAT falls into the return for the period you expect. The full field list for the invoice is in UAE tax invoice requirements.
When is VAT due on each subscription period in Saudi Arabia?
Saudi Arabia reaches a similar result through Article 20 of the VAT Implementing Regulations, with two variants:
| Situation | Date of supply for each period |
|---|---|
| The agreement or invoice sets periodic instalments | Earlier of the instalment's due date or the date it is actually paid |
| Other continuous supplies of services | Earlier of the invoice date or the payment date, to the extent invoiced or paid |
| Nothing invoiced or paid | 12 months after the later of the start of the supply or the previous tax point |
A 2021 amendment limited the separate-supply-per-instalment treatment to services; goods sold on instalments are now treated as one supply at the outset. That is one more reason a subscription should be for services, not stock.
The tax invoice must be issued no later than the 15th day of the month following the month of supply (Article 53), must include Arabic, and carries 15% VAT. On top of that, Phase 2 e-invoicing treats each period's invoice as an ordinary e-invoice. A standard tax invoice to a business customer is cleared through Fatoora before you send it; a simplified invoice to a consumer is reported within 24 hours. Wave 25 brings in businesses with more than SAR 187,500 of VAT-subject revenue in any year from 2022 to 2025, with a deadline of 1 February 2027, so most small subscription businesses in the Kingdom are now in scope. The billing tool that raises your monthly invoices has to connect to your clearance route. See ZATCA Wave 25 for small businesses.
Deadline: Saudi Arabia: each period's tax invoice by the 15th of the following month, cleared (B2B) or reported within 24 hours (B2C) under Phase 2. Credit and debit notes: within 15 calendar days of the event that causes them.
What happens to VAT on an annual prepaid plan?
An annual plan paid upfront is one supply of the whole year for VAT timing, because the invoice and the payment both happen on day one. All the VAT is due in the return for that period, even though you deliver the service over twelve months.
A Dubai IT support company sells an annual plan on 1 September 2026:
| Line | AED |
|---|---|
| Annual support plan, 1 Sep 2026 – 31 Aug 2027 | 12,000 |
| VAT 5% | 600 |
| Total charged | 12,600 |
The AED 600 goes in the return covering September. The same plan in Riyadh at SAR 12,000 carries SAR 1,800 of VAT (15%), for a total of SAR 13,800, all in the September period.
The accounting is different from the VAT. You have received a year of cash but earned one month of revenue. In the books the AED 12,000 sits as deferred revenue and moves to revenue at AED 1,000 a month. In your metrics the plan counts as AED 1,000 of MRR, not AED 12,000 in September. Treating the prepayment as one month's revenue is the most common way small subscription businesses overstate growth.
Annual plans are still worth selling. They fund the year upfront, they reduce churn because the customer only decides once a year, and a typical offer of two months free (ten months' price for twelve) is cheaper than most customer acquisition.
How should trials, pauses and cancellations be invoiced?
Free trials
A free trial with no charge generally means no consideration and no tax invoice. The first tax invoice is raised when the first paid period starts. Two things to set before you launch a trial: whether a card is required upfront (it improves conversion quality and reduces fake sign-ups) and what happens on the last day, either automatic conversion to paid or expiry. Tell the customer the conversion date in writing. If the trial comes with physical goods or a reduced paid price, get advice on the VAT treatment rather than assuming zero.
Pauses
A paused subscription raises no invoice, so there is no supply and no VAT for the paused periods. When the customer resumes, bill from the resume date forward. Do not back-bill the paused months; if the customer was receiving service during the "pause", it was not a pause.
Cancellations
| Cancellation type | What to issue |
|---|---|
| At period end (the default) | Nothing; the next invoice simply is not raised |
| Immediately, no refund | Nothing; the current invoice stands |
| Immediately, with a pro-rata refund | A tax credit note against the period's invoice for the refunded amount and its VAT |
| Annual plan cancelled mid-year with refund | A tax credit note for the unused months, referencing the annual invoice |
In the UAE a tax credit note is due within 14 days of the event, and it falls under the same AED 2,500 late-issuance penalty. In Saudi Arabia it is due within 15 calendar days. Never delete or edit the original invoice; the credit note is the correction.
Write the cancellation policy into the terms once: notice period, whether refunds are pro-rata, and whether annual plans are refundable at all.
How do you collect subscription payments by card?
Card on file is the collection method that makes subscriptions work, because the customer does nothing each month. Bank transfer subscriptions depend on the customer's accounts team remembering, which is the same problem covered in chasing late payments in Dubai.
Things to know before choosing a processor:
- Availability. Stripe supports businesses registered in the UAE. It does not list Saudi Arabia as a supported country, so KSA businesses usually use a local gateway or an entity registered elsewhere. Check before you design your billing flow around one provider.
- Fees are an expense, not a reduction of the invoice. The customer's invoice is AED 1,575; the processor deducts its fee from the payout. Record the full invoice as paid and the fee as a separate expense, or your revenue and VAT will not match. The detail is in Stripe payments, fees and payouts in the UAE.
- One invoice per period, whoever charges. If the processor charges the card and your accounting system also raises an invoice, make sure they are the same period's invoice, not two. Double billing is the fastest way to lose a subscriber.
What should happen when a card payment fails?
Failed payments are a normal part of subscription billing: expired cards, insufficient funds, bank fraud blocks. Most of them are recoverable if you have a process, which is called dunning.
| Day after failure | Action |
|---|---|
| 0 | Automatic retry by the processor; email the customer with a link to update the card |
| 3 | Second retry; second email |
| 7 | Third retry; message from a person, not a template, for higher-value accounts |
| 14 | Mark the subscription past due; restrict service if your terms allow |
| 21–30 | Cancel the subscription; keep the unpaid invoice open and chase it as a debt |
The VAT does not wait for the money. The tax invoice was issued, so the VAT is due in that period whether or not the card succeeded. If the debt is never recovered, UAE bad debt relief lets you reclaim the output VAT once more than six months have passed since the date of supply, the amount has been written off in your accounts, and you have notified the customer. Saudi Arabia has its own bad debt relief with separate conditions; check them before relying on it.
Which subscription metrics matter, and how do you calculate them?
Five numbers, all measured net of VAT and after discounts. VAT is not your revenue, and including it inflates every figure by 5% or 15%.
| Metric | What it measures | Formula |
|---|---|---|
| MRR | Recurring revenue per month | Sum of monthly value of active subscriptions (annual ÷ 12) |
| Customer churn | Share of customers lost | Customers cancelled ÷ customers at start of month |
| NRR | Revenue kept from existing customers, including upgrades | (Opening MRR + expansion − contraction − churned MRR) ÷ opening MRR |
| ARPA | Average revenue per account | MRR ÷ active accounts |
| LTV | Gross profit from an average customer over their life | ARPA × gross margin ÷ monthly customer churn |
A worked example in AED
A Dubai IT support business sells plans at AED 1,500 a month excluding VAT (AED 1,575 invoiced). September 2026:
| MRR movement | Accounts | AED |
|---|---|---|
| Opening MRR, 1 September | 40 | 60,000 |
| New subscriptions | +4 | +6,000 |
| Expansion (3 accounts add a site, +AED 500 each) | +1,500 | |
| Contraction (2 accounts downgrade, −AED 750 each) | −1,500 | |
| Churn (2 accounts cancel) | −2 | −3,000 |
| Closing MRR, 30 September | 42 | 63,000 |
From that table:
- ARR: 63,000 × 12 = AED 756,000.
- Customer churn: 2 ÷ 40 = 5% for the month.
- Gross revenue retention (GRR): (60,000 − 1,500 − 3,000) ÷ 60,000 = 55,500 ÷ 60,000 = 92.5%.
- NRR: (60,000 + 1,500 − 1,500 − 3,000) ÷ 60,000 = 57,000 ÷ 60,000 = 95%.
- ARPA: 63,000 ÷ 42 = AED 1,500.
- LTV: at 5% monthly churn the average customer stays 1 ÷ 0.05 = 20 months. At a 60% gross margin, 1,500 × 0.60 ÷ 0.05 = AED 18,000 of gross profit per customer.
MRR grew 5%, which looks healthy. NRR below 100% says the existing base is shrinking and growth depends entirely on new sales. 5% monthly customer churn means the business replaces roughly half its customers every year. The LTV sets the ceiling on acquisition cost: spending AED 6,000 to win a customer worth AED 18,000 is sustainable; spending AED 15,000 is not.
From the platform: Staks Subscriptions handles service plans on a schedule you set (every N days, weeks, months or years), with trials, pause and resume (resume never back-bills), and cancel now or at period end. Staks raises one invoice per period, and that invoice posts the revenue and VAT to the ledger. Choose pay by card and Staks creates a recurring Stripe Payment Link; once the customer subscribes, Stripe charges each period and Staks records a paid invoice for it, so nothing is billed twice. The Subscriptions report shows MRR, ARR, new, expansion, contraction and churn movements, customer and MRR churn, NRR, GRR, ARPA, LTV, trial conversion and renewals due, with MRR counted net of tax and after discounts. Staks is not a ZATCA-integrated e-invoicing solution, so Saudi invoices still need a Fatoora clearance route.
Frequently asked questions
Can I issue one invoice for three months of a monthly subscription?
Yes, if you bill quarterly. The date of supply then follows that quarterly invoice or payment, and all three months' VAT is due in that period. What you cannot do is collect a card payment every month and issue one invoice at the end of the quarter: each monthly payment sets its own date of supply, and each needs a tax invoice within the deadline.
Do I charge VAT to subscribers outside the UAE or Saudi Arabia?
Services supplied to customers outside the GCC can qualify for zero-rating as exported services, but the conditions are specific to the customer's location and where the service is used. Confirm the treatment with a tax adviser before issuing 0% invoices.
Should MRR include setup fees or one-off charges?
No. MRR is recurring revenue only. A AED 2,000 onboarding fee is revenue in the month it is earned, but adding it to MRR makes the month look like growth that will not repeat.
Is an unpaid past-due subscription still in MRR?
Most businesses keep past-due subscriptions in MRR during the dunning window and remove them when the subscription is cancelled. Pick one rule and apply it every month so the trend stays comparable.
Related reading
- UAE tax invoice requirements
- ZATCA Wave 25 for small businesses
- Retainer vs project pricing for a Gulf agency
- Stripe payments, fees and payouts in the UAE
Get the invoice-per-period rule right and the VAT follows; measure MRR net of tax and the growth numbers stay honest. Start a 14-day free trial of Staks and set up your first subscription plan.