The Rapid Changing Tax Environment in the United Arab Emirates: The Position of Customs in This Evolution

Abstract

The tax environment of the United Arab Emirates (UAE) is continuously evolving. Over the past six years, we have seen the implementation of Excise Tax laws, Value Added Tax (VAT) laws and the recent introduction of Corporate Income Tax (CIT) laws, with effect in 2023. As such, companies operating in the UAE are, and have been confronted with a multitude of changes and challenges. This article argues that despite the implementation of indirect taxes, and the recent introduction of direct taxes consuming the attention of company operations, the significance of the primitive form of indirect tax in the UAE i.e., Customs, cannot be undermined. On the contrary, the article submits that Customs laws become more so important for companies in the UAE. In this context, this article posits that the customs value is considered as the basis for the assessment of customs duty, and VAT, and serves in certain cases as the value for the determination of the excise tax base (indirect taxes). The Customs laws play an important role for the import and liability of dutiable and excisable goods in the UAE, and can even have a last minute say in whether the importer’s transfer price is at arm’s length for customs duty purposes. Also, the recent progressive steps taken by the UAE government in the form of ratifying Free Trade Agreements (FTAs) each with India and Indonesia, and with likely more to come, underscores the importance of Customs visà- vis global trade in the UAE market. This article also addresses the practical challenges faced by the businesses in the UAE pertaining to Customs/global trade issues and proposes some suggestions to mitigate these issues. Tax, Customs, United Arab Emirates, Challenges, Indirect tax, UAE businesses