Understanding VAT on Importation of Goods by Agents in the UAE

Importing goods into the UAE mainland comes with VAT obligations, but how VAT is accounted for depends on whether the importer is VAT-registered or not. Additionally, when a VAT-registered agent imports goods on behalf of a VAT-registered owner, special VAT return adjustments must be made.

This blog will break down the VAT treatment for imported goods, answer common questions, provide practical examples, and highlight how Fastlane Consultancy can help businesses stay VAT-compliant while optimizing their tax processes.

Common Questions About Import VAT in the UAE

1. What Happens When a VAT-Registered Person Imports Goods into the UAE?

A VAT-registered business importing goods into the UAE mainland does not necessarily have to pay VAT upfront. Instead, they can account for import VAT in their VAT return (Box 6) instead of paying at the time of import—if certain conditions are met.

However, if the importer is not VAT-registered, they must pay VAT upfront before the goods are released by customs.


2. How is Import VAT Recorded When a VAT-Registered Agent Imports Goods on Behalf of a VAT-Registered Owner?

When a VAT-registered importing agent (acting on behalf of a VAT-registered owner) imports goods, the import VAT is initially recorded in the agent’s VAT return. To ensure VAT compliance, both the agent and the owner must make adjustments in their respective VAT returns:


For the VAT-Registered Importing Agent:

  • Since the agent is not the owner of the goods, they cannot recover the VAT.
  • The VAT amount is automatically pre-populated in Box 6 of their VAT return.
  • To nullify this amount, the agent must make a negative adjustment in Box 7 of their VAT return.


For the VAT-Registered Owner of the Goods:

  • The owner must declare the value of imported goods in Box 7 of their VAT return.
  • Since this is treated as a reverse charge mechanism, the owner must:
    • Report VAT payable (output VAT) in Box 7.
    • Recover VAT as input VAT in Box 10, provided they are eligible for recovery.

This ensures that VAT is accounted for correctly while allowing the owner to reclaim the VAT under standard VAT recovery rules.


Practical Example: Importation of Goods by an Agent in UAE

Scenario:

ABC LLC (a VAT-registered company in the UAE) sells electronics and imports goods from China. However, they do not import directly and instead use XYZ LLC (a VAT-registered importing agent) to handle the import process.

  • Value of goods imported: AED 100,000
  • Applicable VAT (5%): AED 5,000
  • Both ABC LLC and XYZ LLC are VAT-registered.

Step 1: Import Process

  • XYZ LLC provides its TRN (Tax Registration Number) at customs when importing the goods.
  • As a result, the import VAT of AED 5,000 is automatically pre-populated in Box 6 of XYZ LLC’s VAT return.

Step 2: VAT Return Adjustments


For XYZ LLC (Importing Agent):

  • Since XYZ LLC is not the owner of the goods, they cannot recover the import VAT.
  • They must reverse the import VAT amount by making a negative adjustment of AED 100,000 in Box 7 of their VAT return.
  • This nullifies the tax liability that was automatically added in Box 6.

For ABC LLC (Owner of the Goods):

  • ABC LLC must declare the imported goods value (AED 100,000) in Box 7 of their VAT return as a reverse charge transaction.
  • They must also account for:
    • AED 5,000 as VAT payable (output VAT) in Box 7.
    • AED 5,000 as VAT recoverable (input VAT) in Box 10, assuming they are eligible to reclaim VAT.


Final Result:

-        XYZ LLC (Importing Agent) has no VAT liability after adjustments.

-        ABC LLC (Owner) accounts for VAT under the reverse charge mechanism.

-        The AED 5,000 VAT is neutral for ABC LLC (reported as both output VAT and input VAT).


Alternative Arrangement: Tax Invoice Instead of VAT Adjustments

Instead of making VAT return adjustments, the importing agent (XYZ LLC) can issue a statement (considered as a tax invoice) to the owner (ABC LLC) under Article 50(7) of the Executive Regulations.


How It Works:

  1. The importing agent (XYZ LLC) issues a tax invoice (statement) to the owner (ABC LLC) for the import VAT amount (AED 5,000).
  2. ABC LLC (the owner) can then recover the VAT by recording it in Box 9 of their VAT return (instead of Box 7 and 10).
  3. No adjustments are needed in the VAT return of XYZ LLC (importing agent).


Practical Example (Alternative Approach)

  • Same scenario as before:
    • ABC LLC (Owner) imports goods through XYZ LLC (Agent).
    • Goods value: AED 100,000
    • Import VAT: AED 5,000


VAT Treatment with Alternative Arrangement:

1.     XYZ LLC (Importing Agent)

    • Issues a tax invoice (statement) to ABC LLC for AED 5,000 VAT instead of making VAT return adjustments.
    • Does not adjust Box 6 or 7 in their VAT return.

2.     ABC LLC (Owner of Goods)

    • Uses the tax invoice from XYZ LLC to claim VAT recovery in Box 9 of their VAT return.
    • No need to declare the imported goods in Box 7.

Key Takeaways

Approach

What Happens in VAT Return?

Where VAT is Recovered?

VAT Return Adjustments (Default Method)

Import VAT is reported in Box 7 & reversed in Box 10.

VAT is recovered in Box 10.

Alternative Arrangement (Tax Invoice Method)

No VAT return adjustments are needed.

VAT is recovered using Box 9 from the tax invoice.

-        VAT-registered importers can account for VAT in their VAT return (Box 6) instead of paying at customs.

 - If an importing agent brings in goods for a VAT-registered owner, adjustments must be made in Box 7 & Box 10 of the VAT return.
 - As an alternative, the importing agent can issue a tax invoice (statement) so the owner can claim VAT in Box 9 instead.
 - Both parties must keep proper records, including a written agreement and customs documents for compliance.

How Fastlane Consultancy Can Help

At Fastlane Consultancy, we specialize in VAT compliance, corporate tax, and accounting solutions in the UAE. Our team can help you:

-         Ensure accurate VAT filings when importing goods.

-        Adjust VAT returns correctly to prevent compliance issues.

-        Assist with MOFA attestation, customs documentation, and tax audits.

-        Simplify reverse charge VAT accounting for import transactions.

Need help with VAT return adjustments or import tax compliance? Contact Fastlane Consultancy today!


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