Since the introduction of VAT, we have had may queries from British companies in relation to the effect of VAT on businesses exporting into the UAE. In this article we explain what impact the 5% VAT will have on any business looking to export into the UAE market.
When goods are imported into the UAE, the place of supply is deemed to be the UAE. By this logic the exporter should be liable to pay VAT, however asthe exporter cannot be registered for VAT in the UAE (as a foreign company), then the importer must consider it as its own VAT output and input. This is where the Reverse Charge Mechanism comes into play.
The Reverse Charge Mechanism is something that an overseas exporter should be aware of, but has little practical impact. As a business exporting goods or services into the UAE you will not have to directly concern yourself with the 5% VAT. However, as the responsibility is shifted to the importer through the Reverse Charge Mechanism of this additional administrative burden on their part: a business buying goods from outside of the UAE, has to report the Input VAT (VAT on purchases) as well as the output VAT (VAT on sales) in their VAT return for the same quarter.
For further information on the Reverse Charge Mechanism please see our September VAT update. Alternatively, if you require professional advice please contact us at the BCB and we would be happy to put you in touch with an appropriate advisor.