VAT on Goods under Customs Duty Suspension

Tally Solutions, Feb-10-2020

In the case of imports into UAE, the term 'Customs duty suspension' is frequently used. Let us understand customs duty suspension and the supplies to which it is applicable.

What is customs duty suspension?

Customs duty suspension is an arrangement by which Customs duty will not be levied on certain imports. These goods which are under the customs duty suspension will also not attract import VAT.

Which supplies are under the customs duty suspension?

The supplies which come under customs duty suspension are:

• Goods entering UAE under temporary admission
• Goods which are placed in a customs warehouse
• Goods entering UAE in transit
• Goods imported which are intended to be re-exported by the same person who imported them

Is a financial guarantee required for goods coming under customs duty suspension?

When an importer imports goods which are considered under customs duty suspension, the importer would be required to provide a financial guarantee equal to the value of VAT which would be due on import, before the goods are allowed to be considered under customs duty suspension.

To learn the process for submitting an e-guarantee, you can refer our article 'Process to pay VAT through e-guarantee.

What happens if the specified supplies do not meet the conditions for customs duty suspension?

If the goods imported do not meet the conditions for customs duty suspension, they will be treated as imported into UAE and VAT will become due on the goods.

What is the difference between goods kept under customs duty suspension and goods which are exempted from import VAT?

A detailed list of the goods which are exempted from import VAT is explained in our article 'Imports on which VAT will not be levied'. Both, the goods kept under customs duty suspension as well as goods exempted from import VAT are imports on which VAT is not levied. The key difference between the two is that on goods which are kept under customs duty suspension, customs duties will not be levied, whereas on goods which are exempted from VAT, customs duties could be levied on import.

Hence, imports which are considered under customs duty suspension are not subject to import VAT and customs duties, provided the required conditions are met.