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VAT on Imports, Exports & the Reverse Charge Mechanism in the UAE
Importing and exporting goods or services across UAE borders can make VAT a little more complex.
Understanding how VAT on imports, VAT on exports, and the reverse charge mechanism (RCM) work ensures your business stays fully compliant with the Federal Tax Authority (FTA).
This guide explains how VAT applies to international trade, what “reverse charge” means, and how to record cross-border transactions correctly in your books and VAT returns.
VAT on Imports in the UAE
What Counts as an Import?
An import occurs when goods or services are brought into the UAE from outside the GCC region, or from a GCC country that hasn’t fully implemented the GCC VAT framework.
VAT applies to:
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Goods imported through UAE Customs
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Services purchased from suppliers based outside the UAE
How VAT on Imports Is Charged
For goods, import VAT is typically paid at customs or accounted for in your VAT return via the reverse charge mechanism.
The VAT is calculated based on:
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CIF value (cost, insurance, and freight), plus
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Customs duties and other charges
How to Account for Import VAT
If you are VAT-registered, you can:
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Declare the import VAT in your VAT return (Box 6 and Box 10 of the FTA form)
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Claim the same amount as input VAT, provided the goods are for taxable business use
This means you don’t physically pay VAT upfront at customs — instead, you “self-account” for it in your VAT return.
Example:
You import AED 100,000 worth of goods.
Import VAT = AED 100,000 × 5% = AED 5,000.
You record AED 5,000 as output VAT (what you owe) and also as input VAT (what you reclaim) — resulting in no cash impact.
VAT on Services Imported from Abroad
If you buy services (e.g. software, consulting, marketing) from an overseas supplier not registered in the UAE, you must apply the reverse charge — meaning you account for both input and output VAT in your return.
This ensures UAE-based businesses don’t gain a tax advantage by buying services from abroad.
NB: You only apply the reverse charge if you’re VAT-registered and the service is used for business purposes.
VAT on Exports from the UAE
Exports are generally zero-rated (0%), meaning VAT applies at 0%, but you can still reclaim input VAT related to those supplies.
Goods Exports
Goods exported to countries outside the GCC are zero-rated, provided you have export evidence (e.g. customs documentation, airway bills).
Exports to GCC states that have not implemented VAT (or are not part of the electronic GCC VAT system) are also treated as zero-rated exports.
Services Exports
Services supplied to clients outside the UAE can also qualify for zero-rating, provided:
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The customer is outside the UAE when the service is performed
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The service is not related to UAE real estate or goods located in the UAE
Examples of zero-rated services:
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Marketing services provided to a UK company
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Software development for a US client
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Design work delivered to a business in Singapore.
Reverse Charge Mechanism Explained
The reverse charge mechanism (RCM) shifts the responsibility for accounting for VAT from the supplier to the buyer.
It is mainly used in two scenarios:
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Imports of goods and services from foreign suppliers
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Certain local supplies where the FTA has designated the buyer to account for VAT (e.g. gold, hydrocarbons, or scrap metal transactions)
How it works:
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The supplier doesn’t charge VAT on the invoice.
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The buyer records both output VAT and input VAT in their VAT return.
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Net effect = zero, if fully recoverable.
Example:
A UAE business purchases AED 50,000 of consulting services from a UK company.
Under reverse charge:
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Output VAT = AED 2,500 (AED 50,000 × 5%)
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Input VAT = AED 2,500 (reclaimed on the same return)
→ Net VAT due = AED 0
Reporting Imports and Exports in Your VAT Return
When filing your VAT return through the FTA portal:
| Transaction Type | Where to Report | Notes |
|---|---|---|
| Imports through UAE customs | Box 6 | Reverse charge applies |
| Imports from unregistered suppliers | Box 7 | Self-accounted VAT |
| Exports outside GCC | Box 4 | Zero-rated supplies |
| Services to foreign customers | Box 4 | Zero-rated if customer outside UAE |
| Reverse charge supplies | Box 3 or Box 6 | As applicable |
Ensure your import and export data matches your customs declarations (SAD forms) and shipping documents to avoid FTA mismatches.
Supporting Documentation You Must Keep
To support your VAT filings, maintain:
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Customs import/export declarations
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Airway bills or shipping notes
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Commercial invoices and supplier contracts
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Proof of payment
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Records of reverse charge calculations
FTA requires you to retain VAT-related records for at least 5 years (or 15 years for real estate).
Common Mistakes to Avoid
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Failing to apply reverse charge on imported services
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Claiming input VAT on exempt supplies
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Missing export documentation (losing zero-rated status)
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Using wrong currency conversions on invoices
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Misreporting imports in the wrong VAT return boxes
These errors can lead to audits or administrative penalties from the FTA.
FAQs About VAT on Imports, Exports & the Reverse Charge Mechanism
Q1. Do I pay VAT at customs when importing goods?
If you’re VAT-registered, no — you account for it in your VAT return under the reverse charge mechanism.
Q2. Are exports to GCC countries zero-rated?
Only if the destination country hasn’t implemented VAT or isn’t part of the GCC VAT system.
Q3. Can I reclaim VAT on imports for exempt activities?
No — you can only reclaim VAT on imports used for taxable (standard or zero-rated) business activities.
Q4. What happens if my supplier applies VAT incorrectly?
You can’t claim input VAT unless the supplier holds a valid TRN and issues a compliant tax invoice.
