Value Added Tax and Imports
Imports are taxable under VAT. When a person registered under VAT in UAE imports goods or services, the importer has to pay VAT on imports on reverse charge basis. This is in addition to customs duty levied on imports. The scenarios of import can be divided as follows:
1. Import by a person registered under VAT
2. Import by a person not registered under VAT
3. Goods trans-shipped via UAE to other GCC countries
4. Goods imported to UAE and exported to other countries
All importers in UAE should register for VAT before 31 December 2017 if their taxable supplies made and imports received exceed AED 375,000 for the last 12 months. Registration for VAT purposes will mean that an importer can defer payment of VAT, so payment shall be due on submission of the return (28 days following the tax period in which the import happened). From 1 January 2018, import of goods that are subject to VAT into the UAE will be affected as follows:
If the Importer wants to pay the VAT on Import he can pay through one of the certified import clearance companies registered with the Federal Tax Authority (FTA) by Submitting the customs declaration in the FTA e-services portal and also if the Importer wants to provide e-Gurantee he can apply by , Submitting the customs declaration through the FTA e-services portal.
When a supply is made, usually, the supplier of goods or services is liable to collect and pay tax to the Federal Tax Authority (FTA). This is called forward charge. Under reverse charge, the recipient of the supply is liable to pay the tax on the supply to the Federal Tax Authority. In the case of imports, as the supplier is outside UAE and is hence, not registered in UAE, the liability to pay tax on the import is on the importer registered under VAT in UAE.
On imports, VAT rate of 5% will be applicable. The only exception is import of precious metals, on which VAT rate of 0% is applicable. The rate of VAT applicable on imports is kept same as the VAT rate applicable on domestic supplies, in order to ensure that imports are taxed equally as domestic supplies and the tax paid by the recipient of the supply on imports is eligible for input tax recovery. The records of imports are required to be maintained for a minimum of 5 years from the end of the year to which the invoices pertain.