As a part of the implementation of customs-related incentives under the economic stimulus package announced by the Dubai Government, Dubai Customs has recently explained the eligibility and process for the customs duty refund. Key takeaways from the clarification issued by Dubai Customs have been summarized below.
1. Eligibility for customs duty refund
Dubai Customs will allow a 1% customs duty refund on goods which fulfill all the following conditions:
2. Minimum refund threshold
Only refunds of AED 100 or more will be processed and disbursed.
3. Import declaration types
Eligible imports cleared under the following import declaration types will qualify for the refund:
4. Imports entitled to customs duty drawback ineligible for refund
Duty drawback usually implies re-export of goods imported into the UAE, i.e. not local resale in the UAE.
Where customs duty refund under the economic stimulus package is credited to the importer by Dubai Customs and a duty drawback is claimed subsequently, the refund amount will be deducted from the total duty drawback amount.
Where a duty drawback has been claimed against the import declaration, i.e. at the time of import clearance, the customs duty refund under the economic stimulus package will not be processed.
5. Imports intended for Automated Transfer of Customs Duty (ATCD)/Makasa process ineligible for refund
The ATCD/Makasa process implies re-export of goods imported into the UAE to the rest of the Gulf Cooperation Council, i.e. not local resale in the UAE.
Where customs duty refund under the economic stimulus package is credited to the importer by Dubai Customs, the full refund amount will be recovered by Dubai Customs at the time of issuance of Makasa stamps as customs duty, irrespective of whether full or partial quantities are being re-exported.
The customs duty can be re-paid through the payment mode mentioned in the customs declaration, i.e. customs duty credit/debit account, cash or cheque.
Customs duty, once recovered, will not be refunded even if the Makasa is cancelled.
6. Refund mechanism
Where customs duty at the time of import has been paid through –
Importers who do not have bank accounts registered with Dubai Customs are advised to register a bank account with the customs code.
7. Refund timelines
The refund will be processed automatically on the 30th day from the import declaration clearance date.
Where customs duty at the time of import has been paid through:
8. Amendment/cancellation of import declarations on which refund has been processed
The refund will be adjusted to reflect any custom duty difference due to amendment/cancellation of the import declarations on which the refund has been processed.
Dubai Customs has been responsive in implementing the customs related incentives announced by the Dubai Government a few weeks ago. Clarifications on the practicalities of implementation continue to be issued to help educate businesses. Several questions regarding the incentive, however, still remain unaddressed. For instance:
Considering the refund is intended as a short-term measure and an outflow that was probably not foreseen while drawing up the state budgets, Dubai Government and/or Dubai Customs may not have surplus resources to invest in the initial implementation/governance of the special incentive scheme. Therefore, the refund may be processed “automatically” for administrative convenience, but the onus of establishing the eligibility for the refund will still rest with the recipient.
If a recipient is found ineligible, the possibility of the customs authorities recovering any refunds processed along with penalties cannot be ruled out. With customs audits in the UAE steadily increasing, in the absence of a governance framework that regulates the disbursal of refunds upfront, recipients of refunds may be prone to customs audits that eventually question not just the recipient’s eligibility for refunds, but the general compliance of the recipient’s import–export functions.
At the same time, the incentive warrants an analysis, even if only a quick one, of the supply chain, to identify potential opportunities to optimize refunds and improve profitability without business disruptions.
KPMG Lower Gulf has developed a spot assessment tool to assist your organization in assessing its eligibility for claiming this customs duty refund. We recommend businesses assess their eligibility for a refund and seek consultation to ensure compliance with the incentive scheme and discuss potential opportunities to optimally utilize the incentive.