A business that is involved in importing and/or exporting products requires a full understanding of VAT obligations to ensure legal compliance.
How does import VAT work for countries not implementing VAT?
If a business imports goods that are not from states that are implementing VAT, there are areas of opportunity and compliance that are to be taken into consideration. They are the valuation of imports, commodity codes for the goods imported, and facilitation schemes that may apply.
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An importer is legally responsible in proactively assessing and determining the value of goods and assigning correct commodity code descriptions, used in determining the applicability of VAT and the right VAT rates. Declaring correct information to the UAE Federal Tax Authority and Federal Customs Authority in UAE is essential as even the slightest mistake leads to overpayment or underpayment of VAT and duty for imports, leading to a huge impact on the profitability of businesses.
In addition, the local tax authorities have introduced recently stringent civil penalties which apply to improper import VAT declarations, putting a much greater need for compliance.
Also, businesses are to be aware of the several different facilitation schemes which are available not just for importers but exporters as well. They offer cash flow benefits and tangible import VAT savings. Acquiring the advice of VAT professionals in the UAE can help your business achieve full compliance to relevant regulations while ensuring you take full advantage of the benefits from the local tax code.
Is UAE VAT applicable on imports?
Imports to the UAE are taxable under the UAE VAT regime. When a legal entity registered for VAT imports goods and/or services, it has the responsibility in paying VAT for the import on a reverse charge mechanism apart from customs duty that is levied on every import. There are different regulations, depending on the scenario of the import. Different conditions are divided based on the following:
- Import by an entity that is registered for VAT in UAE
- Goods transshipped to a GCC country from the UAE
- Import by an entity that is not registered under the UAE VAT regime
- Goods that are imported to the country and exported to another country
A VAT rate of five percent is applicable to imports to the country. The only exception would be the import of precious metal as it is zero rated. The rate for imports on VAT is the same as the rate that’s applicable on all domestic supplies to make sure that the imports have a tax that is equal to the rate for domestic supplies.
Note: tax paid to the FTA for a supply will be eligible for VAT reclaim. It is best to seek the help of tax professionals in the UAE, especially for input VAT recovery.
How does import VAT work, particularly for imports from VAT-implementing GCC states?
Intra-GCC transactions have to be considered proactively with specific reporting requirements in place. Failure in meeting VAT reporting- responsibilities create issues on legal compliance for a business in the UAE. As the UAE’s relationship with VAT-implementing GCC states continually evolve, it’s important to keep abreast of all regulatory changes which occur. This is to stay on the favorable side of the local legislation, especially on import and export VAT and duties.
Is VAT applicable to exports from UAE?
Businesses in UAE can zero-rate or apply a zero rate for VAT to any sale of an item that is to a customer outside the UAE. But, evidence of each export transaction has to be kept in order to comply with relevant regulations. It’s necessary to make sure that the goods are exported three months from point of sale. Evidence of date goods are sent onto customers or date of receipt of full payment for export has to be kept.
Value of export of goods and/or services is to be included in tax returns. Other information that are to be kept and retained for six years include:
- Business details of the customer
- Detailed description of goods
- Value of the goods
- Method of transport
- Route of export
- Where goods will travel
- Customer orders
- Sales invoices
- Proof of correspondence between supplier and customer
- Bank statements
- The consignment notes that show goods are received abroad
- Packing lists
- Invoices from haulers
At VAT Registration UAE, our team of tax professionals can provide you with proactive advice to determine the right VAT values for imports and exports. With in-depth expertise and knowledge on international tax laws, our team offers a complete range of VAT support, advice, and consultancy services to help your company understand how VAT legislation applies to you. We can discuss today any issues you may have involving VAT and customs duties. Our VAT experts in Dubai, UAE have decades of experience dealing with international taxation and can provide you with commercially intuitive advice on all of your VAT obligations. Call us today!