V.A.T. and imported goods in the U.A.E.

UAE VAT pic V.A.T. and imported goods in the U.A.E.

Import of goods – Importer of Record

It is customary to import certain goods and services during business operation for different purposes; some of the reason for importing goods are not limited to;

  • Non-availability of a certain type of goods.
  • Better quality.
  • Competitive prices.

There could be multiple factors where the importer is unable to import goods, directly, following are few of them;

  • Regulatory and licensing issue.
  • Inability to import in its name for any reason.
  • Clearing issues due to the nature of goods.
  • The economic issue, such as transportation costs, avoid delays in delivery, etc.

After the implementation of Value Added Tax (V.A.T.) in the United Arab Emirates; the importing of goods and custom operation has been linked to the Federal Tax Authority (F.T.A.), in order to know the value of goods imported by an importing party and for which V.A.T. is due and whether to be collected at the time of clearing goods or to be declared on Taxpayer F.T.A. portal account and regardless whether or not the taxpayer can report it through the Reverse-charge-Mechanism (R.C.M.).

The F.T.A. has implemented Import Tax on goods imported into the United Arab Emirates. The question arises is that who should bear import tax, if the goods are imported by a certain party but the importer of record (I.O.R.) is the another party, and the implication of agent, and more importantly what would be considered the place of supply for such goods and hence the V.A.T. application?

It needs to be carefully assessed in order to ascertain the party who is required to pay or report V.A.T. on these imported goods. There are three possible scenarios which are generally observed in the United Arab Emirates while the importation of goods;

  1. Goods imported by direct importer/buyer.
  2. Goods imported by agents on behalf of importer/buyer.
  3. Goods imported by customers on behalf of the importer/supplier.

The Federal Customs Authority is a separate Government Agency that is responsible for collecting import tax on behalf of federal tax authority on each goods imported into the United Arab Emirates and to communicate with Federal Tax Authority if the importer of record is a registered taxpayer with Federal Tax Authority. The F.T.A. requires the custom authority to declare them the value of goods imported by the registered taxpayer through their linked portal on the F.T.A. website.

It is worth noting that Federal Tax Authority requires the actual importer/buyer/supplier of goods to pay import tax and declare it on its V.A.T. Filing for the required period regardless of the fact who is Importer of Record (I.O.R.) as mentioned above.

The Importer of Record (I.O.R.) of goods imported will observe such imports are auto-populated/filed on their V.A.T. Return for the upcoming filing period regardless of the facts that such goods are either imported on behalf of supplier/buyer/importer as an agent or customer of such goods as mentioned in point 2 & 3 above.

Such declaration of goods does not belong to them and should be addressed in such a way that those goods are taxed by the actual party who is actually importing those goods for its business purposes;

For further details, please visit the Federal Tax Authority related to following guidelines on the importation of goods;

  • Importation of goods by agents on behalf of V.A.T. registered persons
  • V.A.T. Import Declaration User Guide

Anyone importing goods through U.A.E. custom is obliged to pay import tax either registered or not registered as a Taxpayer.

Only registered taxpayers can declare Import tax on their F.T.A. portal account; hence no payment is required to be made at the time of customs clearance of such goods.

The actual importer other than Importer is Record (I.O.R.) is obliged to pay Import tax.

Both taxpayers are responsible for rectifying imported goods to be correctly declared on their respective upcoming V.A.T. Return filing.

A careful analysis should determine the place of supply. If determined to be in the U.A.E., then the supply should be taxed at the standard rate by the seller, regardless of who is the importer or the importer of records, subject to the adjustment on reporting as clarified by the F.T.A. in their publication.

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