Case Study: VAT Treatment of Imports of Goods on Behalf of Another Taxable Person in the UAE

How VAT is Accounted for When Goods are Imported on Behalf of Another Taxable Person?

Mr. Steve is the owner of a UAE-based trading company that is duly registered for VAT. Similarly, Mr. Rogers operates a manufacturing company in the UAE, which is also registered for VAT.

In this scenario, Mr. Rogers places an order for specialized machinery from a supplier located in Germany. The supplier ships the goods directly from Germany to Dubai.
Although Mr. Rogers orders the machinery, Mr. Steve takes on the responsibility of arranging the import clearance procedures on behalf of Mr. Rogers.

Who is Responsible for VAT, and How Should it be Treated in the VAT Return?

When goods are imported on behalf of a customer, the VAT treatment depends on who is declared as the Importer of Record on the customs import documents.

VAT Analysis

Scenario 1: Mr. Rogers as Importer of Record

• The customs import declaration shows Mr. Rogers as the importer.
• VAT Obligation: Import VAT is assessed against Mr. Rogers.

VAT Return Treatment

Mr. Rogers:

• Mr. Rogers must report the import value in Box 6 – Goods imported into the UAE of the VAT return, as the customer’s import-export code is linked to the TRN, and the value will automatically prepopulate in the customer’s VAT return.
• Mr. Rogers can claim the same VAT in Box 10 – Input VAT (if the machinery is used for taxable business purposes).
• Net effect: No cash flow impact, provided input VAT is fully recoverable.

Mr. Steve:

• Mr. Steve only provides an import facilitation/handling service.
• Mr. Steve issues a tax invoice to Mr. Rogers for service charges.
• The service charge is subject to 5% VAT, which Mr. Steve reports as output VAT in his VAT return.

The Import VAT is not Mr. Steve’s liability; it rests with Mr. Rogers as the importer of record.

Scenario 2: Mr. Steve as Importer of Record

• The customs import declaration shows Mr. Steve as the importer.
• VAT Obligation: Import VAT is assessed against Mr. Steve.

VAT Return Treatment

Mr. Steve:

• Mr. Steve declares import VAT in Box 6 – VAT on imports of its VAT return as the import-export code is linked to the TRN, and the value will automatically prepopulate in their VAT return.
• Mr. Steve claims recoverable input VAT in Box 10 – Supplies subject to the reverse charge provisions (since the import relates to onward supply to Mr. Rogers).

• Mr. Steve recharges the machinery cost plus service margin (if any) to Mr. Rogers.
• Mr. Steve must issue a VAT-compliant invoice to Mr. Rogers for the full recharge value, applying 5% VAT.

Mr. Rogers:

• Mr. Rogers may claim input VAT on Mr. Steve’s tax invoice, subject to the normal recovery rules.

Mr. Steve charges the service fee together with the import cost; he becomes responsible for the import VAT and must treat the recharge as a taxable supply of goods to Mr. Rogers.

Scenario 3: Mr. Steve as Importer (Facilitator using Import/Export Code)

• Customs declaration shows Mr. Steve as the importer because his Import/Export Code is used.
• The goods actually belong to Mr. Rogers, and Mr. Steve is not making a supply of goods but only facilitating clearance.

VAT Return Treatment:

Mr. Steve:

• The import automatically appears in Box 6 – VAT on imports of Mr. Steve’s VAT return.
• Since Mr. Steve is not the true importer, it must make an adjustment in Box 7 – Adjustments to goods imported into the UAE to reverse this entry.
• Mr. Steve issues a tax invoice only for the facilitation/service fee, charging 5% VAT.
• Mr. Steve has no right to recover input VAT on the goods, as they do not belong to it.

Mr. Rogers:

• Mr. Rogers, being the beneficial owner of the goods, is obliged to report the import VAT under the reverse charge mechanism in Box 6 of its VAT return.
• Since the import was carried out under Mr. Steve’s name, the import value will be prepopulated only in his VAT return. Accordingly, Mr. Rogers must make an adjustment in Box 7 – Adjustments to goods imported into the UAE to report the import, which has already been reversed by Mr. Steve.
• Mr. Rogers can then claim recoverable VAT as input VAT in Box 10, subject to normal recovery rules.

The import is reallocated from Mr. Steve (facilitator) to Mr. Rogers (owner), ensuring VAT is correctly aligned.

Scenario 4. VAT Treatment on Goods Imported on Behalf of a Customer

• Mr. Steve is VAT-registered in the UAE.
• He imports goods using his Import/Export Code, but the goods are intended for personal use. (Not for business purposes).
• Customs declaration lists Mr. Steve as the importer, so the import VAT is automatically pre-populated in Mr. Steve’s VAT return (Box 6).

VAT Return Treatment

• Import VAT: Since Mr. Steve is listed as the importer, the import VAT will appear in Box 6 – VAT on imports of Mr. Steve’s VAT return.
• Input VAT recovery:
  • The import is not related to taxable business activities.
  • Therefore, Mr. Steve cannot claim this VAT as input tax in Box 10.
  • The import VAT remains a cost to the company/owner.
• No Output VAT: There is no onward supply; hence, no VAT invoice is issued, and no output VAT is reported.

The VAT law restricts the recovery of input VAT on goods and services that are not used for business purposes. Imports for personal use of the owner, employees, or related parties are blocked from recovery, even if pre-populated in the VAT return. Mr. Steve must ensure the import VAT remains reported in Box 6 but not claimed in Box 10.

Comparison of All Scenarios

Aspect	Scenario 1: Mr. Rogers Importer	Scenario 2: Mr. Steve Importer (Principal)	Scenario 3: Mr. Steve Importer (Facilitator)	Scenario 4: Mr. Steve Importer (Personal Use)
Importer of Record	Mr. Rogers	Mr. Steve	Mr. Steve (facilitator)	Mr. Steve
Goods ownership	Mr. Rogers	Mr. Steve	Mr. Rogers	Owner (personal use)
Import VAT in Box 6 (Mr. Steve)	No	Yes	Yes	Yes
Box 7 Adjustment (Mr. Steve)	N/A	N/A	Required (reallocation)	Not applicable
Input VAT recovery	Mr. Rogers (Box 10)	Company A (Box 10, then recharges)	Mr. Rogers (Box 10)	Not allowed
Output VAT	Service fee only (5%)	Full recharge with 5% VAT	Service fee only (5%)	None
Final VAT Burden	Mr. Rogers	Mr. Steve	Mr. Rogers	Mr. Steve / Owner bears VAT cost

 

Conclusion

• Scenario 1: Mr. Rogers as importer of record.
• Scenario 2: Mr. Steve imports as principal and supplies goods to Mr. Rogers.
• Scenario 3: Mr. Steve facilitates import using its code – must adjust Box 7, Mr. Rogers' accounts under RCM.
• Scenario 4: Imports for personal use – VAT cannot be reclaimed and remains a cost.

Contact Us Today to Ensure Full Compliance With Your VAT Return Filing Requirements and Receive Expert Guidance Tailored to Your Business in the UAE.

Ajil Varghese | Associate Director - Taxation
+971 54 2119 621
Ajil.Varghese@claemirates.com