UAE Tax: TP Adjustments Impact on VAT and Customs

Impact

• Under UAE VAT laws, value of supply between RP should be as per the market value, except in cases where the recipient is eligible to recover for full input tax credit (ITC)
• Any TP adjustments may result in adjustment in:
  • consideration of previous supply (for supplier); and
  • corresponding adjustment in the value of goods/ services on which ITC claimed (for recipient)
  • changes in value of Reverse Charge Mechanism for cross border transactions

• Computation and payment of differential VAT or claiming reduction of VAT liability
• Claiming of additional ITC or reversing of ITC
• Issuing of tax invoices/ tax credits notes/ commercial credit notes (for the differential value) within prescribed timeframe
• Filing of Voluntary Disclosures (VD) for revising the earlier filed VAT returns
• Payment of penalties on filing of VD
• Evaluate the timing of such adjustments in accordance with the date of supply provisions

• Customs duty is generally calculated on the transaction value (i.e., the price actually paid or payable for the import)
• When the value is adjusted upwards, importer may incur additional customs duties due increase in import price of goods or vice versa
• The Dubai Customs had introduced a Voluntary Disclosure System (Customs Policy no. 58/2024) providing an opportunity to importers to voluntarily file statement informing about any inadvertent errors and/or violations committed during customs clearance
• In this scheme, on voluntary disclosure, importers are entitled for partial or full exemption from customs fines

• Assess the impact of TP adjustments on the value of imported goods and customs duties thereof
• Evaluate whether benefit can be availed under the Voluntary Disclosure System
• Assess the documentation and process for filing the disclosure statement
• Inter-company agreements to establish the value of such RP transactions