VAT on Imports: Complete Guide to Calculation, Payment, and Recovery

Value Added Tax applies to most imports into the region at the standard 5% rate. Understanding VAT calculation, payment requirements, and recovery mechanisms is essential for accurate cost planning and compliance.

VAT Calculation on Imports

Import VAT is calculated on the customs value plus duties and other charges. For a shipment with CIF value of AED 100,000 and 5% customs duty, import VAT would be 5% of AED 105,000 (value plus duty), equaling AED 5,250.

Certain goods qualify for exemptions or zero-rating, including specific food items, medical equipment, and educational materials. Confirm the VAT treatment of your products before importation.

Payment Timing and Methods

Import VAT is payable at the time of customs clearance, before goods are released. This creates cash flow implications for importers, particularly those with significant import volumes.

Registered businesses can recover import VAT as input tax on their periodic VAT returns, making it a timing difference rather than a net cost. However, the cash outlay at importation affects working capital.

Deferred Payment Schemes

Approved Economic Operator programs allow qualified importers to defer VAT payment, releasing goods without immediate payment and settling obligations monthly. Qualification requires clean compliance records and financial security.

This deferral significantly improves cash flow for regular importers, eliminating the gap between VAT payment at import and recovery through VAT returns.

Documentation Requirements

Import VAT recovery requires proper documentation, including customs declarations showing VAT paid, commercial invoices matching declaration values, and evidence that imported goods relate to taxable business activities.

Maintain organized records for audit purposes—VAT authorities regularly review import VAT recovery claims, particularly for high-value shipments.