Goods or Services that are supplied from UAE to a person located outside UAE, the supply is called an export. The location of the recipient can be the person’s place of establishment or fixed establishment.
Exports are considered as taxable supplies that are zero-rated that is tax at 0% is applicable on exports. The treatment of exports is based on certain situations which are Export of goods outside a GCC VAT implementing state, Export of goods to unregistered recipients in a GCC VAT implementing state, Export of goods to registered recipients in a GCC VAT implementing state and Export of goods which require installation or assembly outside the state.
As exports are taxable supplies, input tax can be recovered on supplies used to make exports. If the exporter makes domestic supplies also, the input tax recovered can be used to reduce their tax liability. If the exporter is dealing solely in exports, the exporter can get refund of the tax paid on inputs. Records of exports made are required to be maintained for minimum 5 years from the end of the year to which the invoices pertain.
Goods or Services that are received from outside UAE into UAE, the supply is called an import.
Imports are taxable under VAT in Dubai. When a person registered under VAT in Dubai imports goods or services, the importer have to pay VAT on imports on reverse charge (the recipient of the supply is liable to pay the tax on the supply to the Federal Tax Authority) basis, in addition to customs duty levied on imports. The scenarios of import can be divided into Import by a person registered under VAT, Import by a person not registered under VAT, Goods trans-shipped via UAE to other GCC countries and Goods imported to UAE and exported to other countries.
VAT rate of 5% will be applicable on imports with exception of VAT rate of 0% is applicable in import of precious metals. 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.
The tax paid by the recipient of the supply on imports is eligible for input tax recovery. Records of imports are required to be maintained for minimum 5 years from the end of the year to which the invoices pertain.