VAT Implications of Importing Goods by Agent on Behalf of VAT Registered Persons in UAE

With its advancement in logistics facilities and easy access across the world, UAE has been a focal point for the trading transactions in the Middle East. Also, the favourable efforts from the UAE government have played a decisive role to support the exports and imports by the companies in a controlled environment by always adopting the best practices in the world.

VAT is charged on goods and services that are used or incurred inside the UAE. In some cases, importation of goods can happen by VAT registered agents acting on behalf of the VAT registered persons in UAE. When the agent imports the goods on behalf of the taxable person, the tax amounts of the goods that are imported will be automatically occupied in the VAT report of the agent. When it comes to importing transactions, companies engage agents to act on their behalf to take care of all the clearance procedures. Again there can be situations where the companies delegate their responsibilities relating to import to their customers based on the agreed terms between them, where customers will act as an agent on behalf of the owner of the goods. 

How is VAT accounted during import by an agent in UAE?

The agent will have to submit all the required import documents to obtain clearance from customs. Along with the import documents the agent has to provide their Tax Registration Number (TRN) during the import of goods. Once the agent provides the TRN, the value of imported goods will get automatically populated in the subsequent VAT return form (Form no. 201) of the agent and will calculate the VAT on imported goods along with the net tax payable by the agent. There is an exclusive field in VAT return as given below (Box numbered 6) to automatically capture the value of imported goods.

Who can recover the VAT incurred during the import of goods by an agent in UAE?

FTA has specifically clarified that only the actual owner of the goods can claim the recovery of any VAT incurred during the import of goods. Even if the agent has facilitated the import on behalf of the owner and the import value gets populated in the VAT return of the agent, the agent cannot claim the recovery of the VAT.

How can the owner recover VAT during the import of goods by an agent in UAE?

The owner of the imported goods can recover the import VAT in two ways as discussed below:

1. Adjustments in VAT return by both agent and the owner of the goods

To accommodate the recovery of import VAT by the actual owner of the goods, one adjustment field has been provided in the VAT return form 201 as below (Box numbered 7). Adjustments have to be manually inserted by both agent and the owner in their respective VAT returns based on a written agreement between them. While the agent has to put a negative adjustment to nullify the value of imported goods automatically got populated in its VAT return, the actual owner has to include a positive adjustment to reflect the value of imported goods in its VAT return. Once these adjustments are included by both parties in their respective VAT returns, the impact of VAT for the imported goods by the agent will be removed from the return of the agent and will be correctly reflected in the return of the owner of the goods. The owner of the goods can then recover this VAT as per the general VAT recovery rules.

2. Tax invoice issued by agent to the owner of goods for import VAT

Both agent and the owner can mutually agree not to make adjustments in their VAT returns. In such cases, agents will have to pay the VAT to FTA which will be calculated on the value of imported goods automatically populated in its VAT return.  For the VAT paid by the agent on behalf of the owner, the agent can issue a statement to the owner with all the below details:

• Date of the statement
• Date of import
• Name, address and TRN of the agent
• Details of imported goods
• Amount of VAT paid

This statement can be considered as a tax invoice by the owner of the goods and use the same to reimburse the amount to the agent and also to recover the input tax as per the general VAT recovery rules. 

Example 

Agent ‘A’ imports taxable goods on behalf of a manufacturing company ‘B’ (assume that it produces only taxable goods) with the value of goods AED 100,000. Both are VAT registered in UAE. While completing the import clearance “A” submitted his TRN. VAT amount for this transaction would be AED 5,000 and the treatment is explained in the below scenarios.

Scenario: 1 – A and B agrees for adjustments in both of their VAT returns

In the VAT return of A, this particular import of goods in the example will be reflected as below

Also read, How to Choose a VAT Return Filing Consultant

In the VAT return of B, this particular import of goods in the example will be reflected as below

Scenario: 2 – A and B agrees not to make adjustments in both of their VAT returns and A issues a tax invoice to B for the VAT paid to FTA

In the VAT return of A, this particular import of goods in the example will be reflected as below

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In the VAT return of B, this particular import of goods in the example will be reflected as below

Hope you got a clear understanding of the VAT implications of importing goods by an agent on behalf of a VAT registered person in UAE, and other tax accounting approach in connection with the importation of goods. If you still have any doubts, contact CDA and you will get expert VAT consultancy services in UAE to clear your doubts regarding the VAT implications on imported goods.