Doing business in a city like Dubai sounds very exciting. However, to import goods into this global city, you will need to deal with the Dubai import tax. These taxes may vary depending on certain goods and circumstances. In this blog, we will explore the legal framework, tax calculation methods, and specific products subject to import duties in UAE, further debunking the common misconceptions about import tax and discussing its real impact on businesses in Dubai.
Legal Framework of Dubai import tax
In January 2018, the United Arab Emirates introduced Value Added Tax(VAT) in its system. It imposed 5% VAT on general goods and services, except for a few that meet specific conditions.
The legal framework of import tax in Dubai is quite detailed. Any business with an annual turnover of AED 375,000 or above is subject to mandatory VAT registration with the FTA (Federal Tax Authority) in the UAE. On the other hand, businesses that stay up to the threshold of AED 187,500 can opt for voluntary registration.
For non-resident businesses, there is no registration threshold. However, they are required to comply with VAT obligations in order to avoid fines and penalties. In addition, certain transactions in goods between Designated (Free) Zones (DZs) in the UAE may not be subject to VAT.
Calculation of import tax in UAE
The calculation of Dubai import tax relies on several factors. For instance, a 5% customs tariff will be imposed on the cost, insurance, and freight (CIF) value of imports. However, for prohibited goods like alcohol and tobacco, the tax rates might vary.
Dubai also offers certain exemptions and reliefs. For example, the UAE government imposes anti-dumping duties on imports of goods like car batteries, ceramic and porcelain tiles, and hydraulic cement. Anti-dumping duties are tariffs levied on imported foreign goods that are sold in the domestic market at a lower value than the fair market price. This tax helps eliminate the cost of dumping and can be determined by calculating the difference between the price of the good in the country of origin and the price for which it was sold in the importing country. Again, the anti-dumping duties may vary depending on the HS codes and the country/origin of export. The HS (Harmonized System) is an international nomenclature used for the classification of products.
Factors that determine the import duties in UAE
The United Arab Emirates imposes customs tax on commercial goods based on the following factors:-
- The jurisdiction where the business is registered – onshore or in a free zone
- Nature of the transported goods.
- Source and destination of the transporting goods.
- Trade agreements between the UAE and exporting countries.
- Other laws and regulations.
Import tax rate structure in Dubai
The tax rates vary based on the type of product that is being imported. For example, for textiles and clothing, the tax rate will range from 5% to 55%, while for electronics, it would be 5% to 15%. For food, beverages, and vehicles, it is 5% to 5o% whereas for cosmetics and toys, it is 0% to 50%.
Certain products like medicine and medical equipment are exempt from import tariffs.
Goods exempted from Dubai import tax
The following goods are relieved from any import duties in UAE:-
- Personal and used items
- National factory shipments
- Diplomatic and military corporations imports
- Charity Imports
- Imports from GCC or Arab countries
- Imports of raw materials from GCC countries that were used in manufacturing local goods
- Deliveries from the World Customs Organization Approved Coordinator
Prohibited and restricted goods in Dubai
There are certain goods that are restricted and prohibited from import and export under the provisions of the Common Customs Law. However, to trade in these goods, the merchant or trader may have to seek special approval from the competent authority.
The list of prohibited goods includes the following:
- Narcotic drugs
- Gambling tools and related products
- Fishing nets made of nylon
- Swine
- Used and reconditioned tires
- Radiation and nuclear contaminating materials
- Goods that dispute the Islamic faith and public morals
The restricted goods list includes:
- Live animals
- Fertilisers and insecticides.
- Ammunition, arms, explosives, and fireworks.
- Illegal medicines
- Alcoholic beverages
- Rough diamonds
- Transmitters and radio products
- New tires
- E-cigarettes
- Nuclear energy-related products
Procedure to claim for Import Tax exemption in Dubai
To claim exemptions in Dubai import tax, businesses with an industrial license must submit a request for relevant tax exemption. The general requirements for this process are –
- Industrial license or initial approval certificate
- Shipping policy notice
- List of materials
- Certificate of origin
- Original bills
Businesses claiming exemptions in import taxes must be registered with the Customs and obtain a Customs Business Code. This code will be further used by customs declarations for clearance. Free Zone entities must ensure proper customs declarations if they want to sell or export goods to the mainland.
Misconceptions about Dubai Import Tax
Candidates seeking exemptions in import tax and tariff need to have proper clarity about the process.
- Goods that are exported temporarily for finishing or repair purposes incur customs taxes equal to the addition resulting from finishing or repair.
- The value of the imported machinery is determined through depreciation from the prices of new machinery, accounting for the period of use and any repair done.
- According to the Common Customs Law of GCC States, the customs value of imported goods is based on CIF. The value of exported goods will be customs declaration value plus costs until the arrival of goods at the destination in the GCC States. The foreign currency exchange rate at the time of Customs declaration submission will be used to calculate Customs charges.
- Restricted goods like alcohol and cigarettes will be subject to higher taxation compared to other countries.
Impact of Dubai import tax on businesses
The recent amendments in the import tax regulations can significantly impact businesses in Dubai, particularly those heavily dependent on imported goods, affecting their operational costs and customers.
Similarly, for businesses with international supply chains, the reduced consignment value threshold will increase customs duties, thereby increasing their operational costs and potentially influencing their productivity and competitiveness.
The adjustments in import duties in UAE can extensively affect business profitability over time. With higher costs of imported goods, consumer prices will increase, leading to potential shifts in consumer demand. On the contrary, reduced customs duties could enhance profitability.
Navigate the intricacies of Dubai Import Tax with Shuraa Tax Consultants
The tax system of Dubai is complicated yet manageable, and one of the major challenges could be to navigate the complexities of this system. However, by staying conversant with the existing and changing VAT rates, customs duties, exemptions, and thresholds, you can ensure compliance and profitability for your business in the UAE. Each relevant detail can help you navigate the dynamic market of Dubai.
Working with a trusted tax consultancy like Shuraa Tax will benefit you in growing your business and staying informed about the Dubai import tax regulations. They will help you understand the import tax categories and rates in Dubai and adeptly handle the customs formalities. In addition, they will provide you with regular updates on the latest advancements to ensure long-term sustainability and success for your business.
For further information on Dubai import tax and penalties for non-payment, connect with Shuraa Tax.
