The Federal Tax Authority (FTA) has recently issued a public clarification on importation of goods by agents on behalf of VAT registered persons.
When a VAT registered importing agent imports goods on behalf of the VAT registered owner of the goods, the VAT amount is automatically pre-populated in Box No. 6 of the VAT return of the importing agent. The clarification highlights the adjustments to be made in the VAT return of both the importing agent and the owner of the goods to enable the recovery of the VAT on importation from the actual owner of the goods.
The importing agent is required to make a negative adjustment in Box No. 7 of the VAT return to nullify the pre-populated value of the imported goods whereas the VAT registered owner of the goods needs to make a positive adjustment in Box No. 7 of the VAT return to include the value of goods imported on behalf by the importing agent. The owner is thus entitled to recover the import VAT as per normal input VAT recovery procedure in Box No.10 of the VAT return.
The clarification requires the owner and the importing agent to enter into a written agreement to make the above adjustments and such agreement is to be retained as record evidence in addition to customs documentation.
The clarification also states that if the owner and the importing agent do not wish to make such adjustments, the importing agent would need to issue a statement to the owner as prescribed in Article 50(7) of the VAT executive regulations. This statement needs to contain the following details:
- the name, address, and tax registration number of the agent;
- the date upon which the statement is issued;
- the date of import of the relevant goods;
- a description of the imported goods; and
- the amount of tax paid by the agent to the authority in respect of the imported goods.
Such statement from the importing agent is considered as a tax invoice for the owner of the goods to recover the input tax in Box No. 7 of the VAT return.