Customs code sharing between Mainland and DZ

Hi, Kindly advise if there’s any tax implications if a company which is in Designated Zone uses the customs code of the Mainland company to clear the goods.

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SAJITH N03/10/2020 18:51:49

The implication would be that the Mainland entity could be considered as import agent of DZ hence Article 50 of Executive Regulations and Public Clarification VATP012 - "Importation of goods by agents on behalf of VAT registered persons" will apply. So the mainland entity would either pay the import VAT and recover the same from DZ entity as per Article 50 or both companies need to do mutual Box 7 adjustment to reflect the import in the VAT return of the actual importer (as per the public clarification). Further, any sale of such goods in Mainland by the DZ entity will be taxable @ 5% unless it is exported in which case zero rating can be applied subject to satisfying conditions for export as per Law.

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