How to Calculate Import Duty and VAT in UAE: A Comprehensive Guide
Businesses across various sectors are using the UAE as a hub for global trade. These businesses import goods to meet the needs of Dubai-based Free Zones (except the Jebel Ali Free Zone) and local markets. Hence, these businesses must be well-versed in the import duties and taxes in UAE.
In this blog, we discuss how to calculate import duty and VAT while importing different goods to UAE. We also discuss the different factors affecting these taxes, tools for calculation, and common errors.
Import Duty and its Calculation
Import duty is a way to boost the competitiveness of locally produced goods in the domestic market. This is done by levying a tax on foreign goods entering a country and thus increasing the cost.
Key Factors in Customs Duties Calculations
Many factors affect import duty calculation in UAE and the total sum payable. Some of these are:
- Value of Imported Goods: The transaction value is the value of goods. It is determined by the CIF (cost, insurance, and freight) value.
- Country of Origin: This is the country where the commodity was made. Certificate of Origin and help determine the country of origin. Calculating customs duties then varies based on the country, import regulations in UAE, policies, and trade agreements.
- Tariff Classification and Valuation: Tariff classification refers to organizing commodities using HS codes (Harmonized System codes). Tariff valuation is finding the value of goods using the deductive method, transaction value method, and more.
Also read: UAE Customs Regulations: A Guide on Customs Duty
Value Added Tax (VAT) in UAE:
VAT came to effect in the United Arab Emirates (UAE) on 1st January 2018. This tax, which was fixed at 5 percent, became a new source of income to provide quality public services.
Step-by-Step Guide for Calculating Customs Duties
The following steps are performed for calculating customs duties:
- Step 1: Finding the correct HS code of the product
Find the correct 6-digit HS code on each product.
- Step 2: Finding the duty rate of the destination country
You can find the duty rate of the country using the HS code.
- Step 3: Determining the Total Customs Value
The value of the products is determined using the transportation costs, product costs, and insurance charges.
- Step 4: Applying the Duty Rate
The customs duties on your goods are calculated by applying the duty to the total customs value.
How to Calculate VAT in UAE for Imports
Value Added Tax (VAT) in the UAE is calculated at 5% on many of the foreign goods imported to the country. VAT is calculated as the sum of CIF value and the applicable customs duty on the goods. Thus, the formula for VAT is:
VAT=5%×(CIF value+Customs Duty)
VAT can vary the overall pricing of goods and affect the profitability of businesses operating in Free Zone Customs Duty UAE and the local market. Understanding these formulas helps calculate import duty and VAT in UAE for small businesses.
Common Exemptions and Reductions to Calculate Import Duty and VAT
Several special cases and trade agreements lead to exemptions and reductions while we calculate Import Duty and VAT in UAE. Some of these are:
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UAE-India Comprehensive Economic Partnership Agreement (CEPA)
This agreement which came into effect on May 1, 2022, includes reduced or removed tariffs on more than 80% of goods, and the access of certain goods to duty-free markets.
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GCC Free Trade Agreements
These agreements between UAE and countries including Singapore, New Zealand, and the European Free Trade Association (EFTA) countries aim to increase exports, boost competitiveness in foreign markets, and reduce trade barriers.
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Greater Arab Free Trade Area Agreement
With this agreement, the UAE gets free trade access to countries such as Kuwait, Qatar, Saudi Arabia, Jordan, Bahrain, Oman, Iraq, Morocco, Egypt, Palestine, Lebanon, Libya, Tunisia, Yemen, and Syria.
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VAT treatment
Some goods and services in UAE are subjected to an exemption or a 0% rate, unlike the general VAT rate of 5%.
Tools and Resources to Calculate Import Duty and VAT
The following are some tools and resources that can help you calculate import duty and VAT in UAE:
- Tally Solutions
- iCustoms
- Easyship
- MyGTS
You should take the service of professionals and customs experts for complex cases of calculations.
Commonly Occurring Errors When You Calculate Import Duty and VAT in UAE for Small Businesses
You can watch out for the following commonly occurring errors when you calculate import duty and VAT in UAE for small businesses:
- Not accounting for inconsistencies in taxation in different countries
- Not regularly updating import tax information
- Misvaluing international shipping goods
- Missing necessary paperwork for import
- Forgetting to label the country of origin for imported goods
- Poor research on regulated goods
- Assigning wrong tariff codes to products
- Late payment of fees and customs duties
- Filing Import Security Filing (ISF) information late, inaccurately, or incompletely
- Not hiring a professional broker for import paperwork
How Ryan Worldwide LLC Help You in taxation on Imported Goods in UAE
Ryan Worldwide LLC is a customs broker in Dubai with an expertise of 15 years in the field. We make customs clearance easy for our clients by representing them during the payment of duties and taxes, assessment, and inspection.
We keep ourselves updated about the developments in import regulations in UAE to meet all your customs clearance requirements most logically. So, partner with Ryan Worldwide for seamless import services. Call us to know more about payment of import duties and taxes:
- Phone: +971559020985
- Email id: sales@ryan-worldwide.com
Frequently Asked Questions
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Is it possible to claim VAT on goods imported into UAE?
An importer registered for VAT in UAE can claim input tax for imports.
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Which are some goods that are exempt from import duties and taxes?
Goods such as fertilizers, necessary equipment and medicines, food grains, and more are exempted from import taxes.
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Are there customs duties in Dubai?
Yes, there are customs duties for foreign goods when the value of each shipment exceeds AED300. This value was approximately AED970 earlier, according to the GCC Unified Guide for Customs Procedure. The reduced rate came into effect on 1 January 2023.
