VAT q&a: 'I shared my import code with a customer. Am I now liable for his tax?'

The business owner let a client to use the code to import Dh100,000 of furniture

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I run a small interior design company helping private clients, rather than businesses, with their homes. As part of this service I often purchase furniture or furnishings from overseas on behalf of customers. A few months ago, a long-standing client asked if he could use my import code to import some furniture for a project I was working on with him. The invoice from the supplier was made out to my customer and he paid the supplier directly for the furniture himself. He purchased furniture worth Dh100,000, so the VAT involved was significant.

I didn't think about the implications of this at the time, but since then my customer and I have had a disagreement and I no longer work with him. We discussed this six months ago and I had forgotten about it until now when my next VAT return is due. I can see on the Federal Tax Authority portal that the VAT for his purchases are included in my current return as part of the import tax automatically populated by customs. How should I account for this VAT? And can I reclaim it as if I had purchased the furniture from the supplier myself? CJ, Abu Dhabi 

This would be far more straightforward if you had purchased and paid for the imported furniture in your company name, and then sold it on to your client. In that scenario the output tax would be accounted for in the customs VAT box and you would have claimed the input tax under the reverse charge mechanism box, on the basis that you had an invoice in your company name.

By asking to use your import code I assume your client was hoping to avoid paying import VAT on his purchases. Unfortunately, it's not legal for him to do this. As the end user of this furniture he cannot escape paying VAT. I strongly advise people not to share import codes unless it is part of an agreed business transaction as the liability to pay the VAT falls with the importer on record.

Article 54 of the decree law states that input tax is recoverable by a taxable person where the goods and services are used or intended to be used for making taxable supplies. That’s not the case here. This furniture was not part of your taxable supplies and you are not able to recover the VAT on them as if you had purchased them.

The correct VAT treatment for this transaction comes under Article 50 of the Executive Regulations, titled Imports by Unregistered Persons, as you have effectively acted as an agent for your customer. Summary clauses say where a person, who is not registered for tax imports goods, is using an agent – who acts on their behalf and who is registered for VAT – the agent is responsible for the payment of the tax as though he imported the goods himself.

An agent who has paid tax, in accordance with this article, cannot then recover any VAT paid on behalf of another person as input tax. Instead, they should issue a statement to that other person, which contains full details of the import and the amount of tax paid in respect of the imported goods. Your customer can treat that statement as a tax invoice, which means if he was registered for VAT he would be able to claim that back as input VAT on his next tax return.As your customer is not VAT registered, he should pay you for the VAT that you have paid on his behalf even though he cannot recover it himself.

Your only course of action now is to pay the VAT as part of your next tax return and issue your customer with the statement as per clause 7 of the Executive Regulations. If you are no longer working together and he refuses to pay the VAT, unfortunately there is little you can do without resorting to legal action, which is unlikely to be practical for the recovery of the Dh5,000 sum.

Lisa Martin, a chartered accountant with more than 20 years of commercial finance experience, is the founder of accounting, auditing and VAT consultancy, The Counting House. Email any VAT queries to