A VAT-registered UAE business imports Concerned Goods for use in its business from a supplier outside the UAE who is not registered for UAE VAT. Under UAE VAT Law (Article 48 of Federal Decree-Law No. 8 of 2017), how is VAT accounted for on this import?
- The importing business applies the reverse charge mechanism, treating itself as having made a taxable supply to itself and self-accounting for output and input tax on the same VAT return
- The foreign supplier must register for UAE VAT and charge VAT directly to the importer at the point of sale
- No VAT applies to imports handled by suppliers who are not registered for UAE VAT, regardless of the goods' destination or use
- The importer must pay VAT in cash to UAE Customs at the border and cannot recover it as input tax
Why A? And why not the others?
Correct answer: A. The importing business applies the reverse charge mechanism, treating itself as having made a taxable supply to itself and self-accounting for output and input tax on the same VAT return
Article 48 provides that when a taxable person imports Concerned Goods or Concerned Services for business purposes, they are treated as making a taxable supply to themselves, making them responsible for accounting for the applicable output tax while simultaneously being able to recover it as input tax (subject to normal recovery rules) on the same VAT return, rather than the foreign supplier charging UAE VAT. Option B is wrong because non-resident suppliers with no UAE VAT registration do not charge UAE VAT directly; the obligation shifts to the UAE recipient precisely because the supplier is outside the UAE VAT system. Option C is wrong because the reverse charge exists specifically to ensure VAT is still accounted for on imports even though the foreign supplier is not registered. Option D is wrong because reverse-charge VAT is self-accounted on the VAT return, not paid in cash at the border, and it remains recoverable as input tax like any other input VAT, subject to the normal recovery conditions.
Source: UAE Federal Decree-Law No. 8 of 2017, Article 48 (Reverse Charge)