Customs documentation for VAT registered traders

Customs documentation for VAT registered traders

Since the introduction of Value Added Tax in 2018, customs regulations and procedures have gained renewed precedence due to the intertwining nature of the two. Customs documentation, in particular, have become instrumental for businesses active in trading. Whether it be for the recovery of input VAT on imports or Zero-rating of exports, customs documents are the key form of evidence as prescribed in VAT laws and procedures. Here we will explore the documentary evidence required to be retained by importers & exporters to successfully apply Reverse Charge Mechanism on the import of goods into the UAE and treat their exports as zero-rated supplies.

One of the primary considerations related to the import and export of goods is the ability to substantiate with appropriate documentation that goods have physically entered or departed the UAE borders. The UAE, along with other GCC member states, follows the GCC Common Customs Law (‘CCL’) which contains provisions and procedures for the importation, exportation, and transit of goods across the territories of GCC member states. While the CCL does not explicitly state the required documentation for import or export, each Emirate’s customs authority provides guidance on the documentary requirements.

Documentary Requirements for Export

The UAE VAT Law mandates importers and exporters to retain documentary evidence, showing the details and considerations related to the supply of goodsFor exports, the UAE VAT Law has bifurcated the documentary evidence into ‘commercial’ and ‘official’ evidence - both of which are required to be retained by the exporter as a condition to prove the export as a zero-rated supply. ‘Official’ evidence are the documents issued by the local Emirate customs authority whereas ‘commercial’ evidence will consist of particulars such as supplier, consignor, goods, value, destination and mode of transport. The timeline needed to export the goods, or to place them in customs suspension, is 90 days from the date of supply. In cases where the ‘official’ and ‘commercial’ evidence has not been obtained, or the goods have not been exported within 90 days of the date of supply, the exporter is required to account for VAT at 5% on such exports.

Most common documentary evidence retained by an exporter are as follows:

1. Commercial Invoice for export
2. Packing List
3. Bill of Lading / Airway bill / Truck Waybill
4. Export Permit from a controlling authority (applicable only to restricted exports)
5. Customs Declaration with relevant export type issued by the local Emirate Customs Authority

Documentary Requirements for Import

To apply Reverse Charge Mechanism on imports, documentary evidences are critical for the input tax recovery of the import VAT paidOne of the conditions for input tax recovery is to retain the import documentation, showing the details of the auto-populated or adjusted import VAT in the VAT return.

For the import of goods, the following are the set of documents an importer must retain:

1. Bill of Lading / Airway Bill;
2. Commercial Invoice;
3. Packing List;
4. Certificate of Origin;
5. Import permit from competent agencies in the event of importing restricted or exempted goods
6. Customs declaration with relevant import type issued by the local Emirate Customs Authority

Timeline for document retention

The CCL provides that customs officers are entitled to have access to all the customs-related documents that are required to be retained by the companies for 5 years from the date of completion of customs operations. Similarly, the requirement of record keeping under the UAE VAT law is for 5 years with an exception to any records related to real estate which is to be kept for 15 years instead. It is vital for the importer and exporter to retain the aforementioned documents and keep them available for an audit or a verification request by a customs officer, or a VAT audit by the FTA.

It is unquestionable from the requirements illustrated above that VAT and customs are inter-related and that a lapse in compliance of customs may easily impact VAT and vice-versa. Traders are obliged now, more than ever, to be compliant with all facets of customs and taxation lest the lapse in one invite the attention of another.

Disclaimer: Content posted is for informational & knowledge sharing purposes only and is not intended to be a substitute for professional advice related to tax, finance or accounting. The view/ interpretation of the publisher is based on the available Law, guidelines, and information. Each reader should take due professional care before you act after reading the contents of that article/ post. No warranty whatsoever is made that any of the articles are accurate and is not intended to provide and should not be relied on for tax or accounting advice.

You can access Law including Guidelines, Cabinet & FTA Decisions, Public Clarifications, Forms, Business Bulletins for all taxes (Vat, Excise, Customs, Corporate Tax, Transfer Pricing) for all GCC Countries in the Law Section of GCC FinTax. 

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