VAT AND IMPORTED GOODS IN THE UAE
The Government of United Arab Emirates has started the implementation of Value added Tax (VAT), January 1st of 2018. All businesses who are VAT registered must comply with all the regulation set by the Federal Tax Authority. VAT Registered Businesses who are dealing with importing of goods and services are facing challenges on how to comply with the VAT rules for these transactions.
Here are the recommended guidelines when clearing imported goods.
- VAT Registered Businesses will apply the Reverse Charge Mechanism to comply with the import VAT and account for the VAT due on their VAT returns. For non-VAT registered Businesses, cash payments for VAT due are made at the point of import.
- The Tax Registration Number (TRN) must be provided to the Customs Department when submitting Customs Import Declaration. Upon validation of the TRN, the Customs Department will clear the shipment without the payment of VAT due at the point of import
- If the TRN is not recognized on the Customs Department system as valid, the following guidelines below are recommended:
- Login to the FTA e-Services portal using the credentials associated with the TRN;
- Navigate to the ‘VAT’ section on the navigation bar at the top of the page;
- Click on the form “VAT301 – Import Declaration Form for VAT Payment”. This is the form which is normally used in the case of non-VAT registered importers;
- Enter the port of entry, customs declaration number, and declaration date, then click next;
- On the next screen, click the button to “Fetch associated registration number”. This will populate the TRN in the declaration form;
- Complete the remainder of the declaration form and click submit;
- A number of payment options will be available. Select the option “Fetch associated registration number”, this is to defer the payment of VAT to the tax return. Click this option and submit the form.
Upon completing this process, the FTA should electronically update the customs declaration on the Customs Department system to show that a VAT payment has been completed. The VAT due on the import should then be automatically populated as a liability on your VAT return for the tax period as normal.
For Businesses who’s using a freight forwarding agent to import goods using their TRN, they may need to complete the declaration process remotely prior to the shipment arriving at the Customs Department. Forwarding agent who’s using their own TRN to declare the shipment cannot recover the paid VAT as it is not attributable to them.
The FTA use guide for importers can be downloaded here: VAT Importers User Guide