Customs Duty and VAT on Imports in the UAE: How Both Are Worked Out

Customs duty and VAT on imports in the UAE are two separate charges. Most goods coming from outside the GCC pay 5% customs duty on their CIF value, and then 5% import VAT on a base that includes that duty. If your business is VAT registered, the VAT is usually accounted for on your VAT return rather than paid in cash at the port.

This guide covers where each charge comes from, how the value is worked out, how reverse charge works, and a worked example you can copy.

Where UAE customs duty comes from: the GCC common external tariff

The UAE is part of the GCC Customs Union, which took effect on 1 January 2003. According to the Federal Authority for Identity, Citizenship, Customs & Port Security (ICP), the union applies a 5% duty to foreign goods imported from outside the GCC. Goods produced in one member state are treated as domestic goods in the others.

So a container landing at Jebel Ali from China, India or Europe starts from the same common tariff as one landing at Khalifa Port in Abu Dhabi. Each emirate has its own customs authority that collects the duty. In Dubai, that is Dubai Customs.

Not every product sits at 5%:

• Exemptions. ICP notes that 417 goods are exempt under an approved schedule.
• Higher rates. Dubai Customs lists 50% for alcohol and 100% for cigarettes. ICP lists 100% for tobacco and its derivatives.
• Product specific rules. Some goods need permits or are restricted.

Before you price anything, look up its HS code in the ICP Central Customs Tariff System. It has a commodity search by description or HS code, an estimated duty calculator and lists of restricted and prohibited goods.

How the customs value is calculated: CIF

Duty is charged on value, so how the value is built matters as much as the rate. Dubai Customs says the customs value of goods imported to Dubai is based on CIF (cost, insurance, freight), under the Common Customs Law of the GCC States. The CIF includes the cost of transport, insurance and relevant charges up to the place of importation.

In practice, the customs value is made up of:

1. Cost. The price paid or payable for the goods, from the commercial invoice.
2. Freight. Transport to the UAE port or airport of entry.
3. Insurance. Cargo insurance to the place of entry.
4. Other charges up to arrival. Costs to get the goods to the place of importation.

Dubai Customs also says the exchange rate used is the one in force when the customs declaration is submitted, not the date on your supplier's invoice.

This matters for how you buy. If you buy FOB Shanghai, the supplier's invoice does not include sea freight or insurance. Those still have to be added to reach the CIF value. If you buy CIF Jebel Ali, they are already in the price. Either way, the duty base ends up roughly the same. What changes is who arranges the freight and whose invoice shows it.

Customs duty and VAT on imports in the UAE: how they stack

The standard VAT rate is 5%, and it applies to imports as well as local supplies (Article 3 of the VAT Decree-Law).

Article 35 sets the value of an import. It is the customs value under customs legislation, including insurance, freight and any customs fees and Excise Tax paid on the import. VAT itself is not included.

That means import VAT is charged on top of customs duty, not alongside it:

Paying import VAT: reverse charge or pay before release

How you settle import VAT depends on whether the importer of record is VAT registered.

VAT-registered importers: reverse charge

Under Article 48 of the VAT Decree-Law, a taxable person who imports goods for its business is treated as making a supply to itself. In practice, that means you declare the import VAT on your own VAT return instead of paying it at customs.

The FTA's VAT Returns User Guide explains how this works:

• Box 6 ("Goods imported into the UAE") is auto-populated from imports declared under your customs registration number, which should be linked to your TRN. The amount includes customs duties and Excise Tax paid, and the VAT is calculated at 5%.
• Box 7 is for corrections, for example an import that is missing from Box 6 or goods that are not standard-rated.
• Box 10 is where you recover the VAT you declared as output tax under the reverse charge, if you are entitled to recover it.

For a fully taxable business, the output and input entries usually cancel out. But that only happens if the customs code and TRN are linked. If they are not, the imports will not pre-fill and you will have reconciliation work at quarter end.

Non-registered importers: pay before clearance

The FTA's VAT Import Declaration User Guide says non-registered importers must pay the applicable taxes before clearing the goods. Import VAT is calculated on the value of the goods including any customs duty and excise tax. The steps are:

1. Submit the customs declaration as normal. Once approved, it moves to "Pending Tax Payment".
2. Create an FTA e-Services account if you do not have one.
3. Log in and open VAT301 – Import Declaration Form for VAT Payment. Enter the customs authority, declaration number and date.
4. Check the pre-filled details (HS code, CIF value, duty) and pay through e-Dirham.
5. Once payment is confirmed, customs clearance can be completed.

The same guide covers goods imported under duty suspension and transfers between designated zones. For those, the importer provides an e-guarantee for the VAT or a cash deposit instead of paying outright.

Worked example: a hypothetical Dubai import

This example is hypothetical. It uses the standard 5% duty and 5% VAT rates and assumes the goods are standard-rated, are not excise goods and come from outside the GCC.

Say a Dubai trading company imports kitchen equipment from Italy, sea freight into Jebel Ali. The goods clear to the mainland. All figures are already converted to AED at the declaration-date rate.

Two things this example leaves out:

• Customs and port fees. Under Article 35, any customs fees paid on the import also go into the VAT base. They vary by authority and service, so they are not shown here. Check the current fees with Dubai Customs or your clearing agent.
• Cash flow. If the company is VAT registered and its customs code is linked to its TRN, the AED 2,283.75 goes through Box 6 and, if recoverable, Box 10. The only cash paid at clearance is the duty and fees. If it is not registered, it pays the AED 2,283.75 through VAT301 before release.

Common mistakes that cost UAE importers money

1. Using the FOB price as the customs value. Dubai Customs values on CIF. If freight and insurance are missing from the declaration, expect a revaluation.
2. Assuming every product is 5%. Check the HS code in the ICP tariff before quoting a landed cost to a customer.
3. Not linking the customs code to the TRN. Box 6 will not pre-fill, and you may end up paying VAT you could have reverse charged.
4. Treating duty and VAT as one tax. Duty is a cost unless a relief applies. Import VAT is usually recoverable for a fully taxable business. Your landed cost and your margin should treat them differently.
5. Forgetting the exchange rate date. The declaration-date rate applies, so a currency move between invoice and arrival changes the duty.

Keeping the paperwork straight

Duty and VAT are only calculated correctly when the declaration matches the documents: commercial invoice, packing list, bill of lading or airway bill, and any certificate of origin. Most delays come from those documents not matching each other.

If you clear regularly, keep each shipment's documents, clearing agent and hold or release status in one place. Quickship's Customs Clearance Module does this for UAE and Saudi imports: documents are kept against the shipment, clearing agents work inside the same record, and a hold shows up the day it happens.