The short version
- Cost each shipment: goods, freight, insurance, 5% duty and clearing fees land in the stock value.
- Import VAT is a return entry: a registered importer accounts for 5% under the reverse charge in Box 6 and recovers it in Box 10.
- Box 6 is built from customs declarations under the customs code linked to your TRN; reconcile it every period.
- FIFO or weighted average are both allowed; keep quantities, values and stock counts at every period end for 7 years (5 for VAT, 7 for corporate tax).
A UAE trading company needs an ERP that treats each shipment as a cost object: landed cost with 5% customs duty, reverse-charge import VAT that reconciles to Box 6, a stock valuation the FTA can audit, and purchase ledgers in the supplier's currency. Accounting software alone records invoices, not the goods.
What does a UAE trading company actually need from business software in 2026?
Eight jobs, and accounting-only software is built for the invoicing ones. UAE non-oil foreign trade passed AED 3.8 trillion in 2025, up 26.8%, with non-oil imports above AED 2.1 trillion and re-exports of AED 830.2 billion (Ministry of Foreign Trade, 31 January 2026).
The eight jobs: stock across several warehouses, landed cost per shipment, import VAT under the reverse charge, foreign-currency purchasing, receivables with credit limits, batch and expiry tracking, bilingual documents, and an audit trail. A system that cannot do the first three is an accounting tool with a stock list attached; see our plain guide to what an ERP is and the Xrero ERP page.
How do trading companies account for customs duty and landed cost?
Duty is part of the cost of the goods, not an expense of the month. Dubai Customs charges 5% of the CIF value (cost, insurance and freight) on most goods, 50% on alcohol and 100% on cigarettes, and converts foreign-currency invoices at the rate on the day the declaration is submitted (Dubai Customs FAQ, accessed 12 September 2026). Duty is not recoverable, so it sits in stock until the goods are sold.
Import VAT is different. Under Article 35 of Federal Decree-Law No. 8 of 2017 the import value for VAT is the customs value, which already includes insurance and freight, plus customs duty and any excise (FTA, VAT law as amended). A registered importer declares that VAT as output tax in Box 6 and recovers it in Box 10 when the goods are for taxable supplies, so it stays out of stock. Hypothetical figures:
| Line (illustrative) | AED | Where it goes |
|---|---|---|
| Goods on supplier invoice | 100,000 | Stock cost |
| Sea freight | 8,000 | Stock cost |
| Insurance | 2,000 | Stock cost |
| CIF value | 110,000 | Duty base |
| Customs duty at 5% | 5,500 | Stock cost |
| Clearing and port fees | 1,500 | Stock cost |
| Landed stock cost | 117,000 | Inventory, then cost of sales |
| Import VAT at 5% on 115,500 (CIF + duty) | 5,775 | Box 6 as output tax; recovered in Box 10 if the goods are for taxable supplies |
The clearing agent's fee is part of the stock cost but not of the customs value, so it stays outside the Box 6 base. A landed-cost feature must attach freight, insurance, duty and clearing invoices to a receipt after the goods arrive, allocate them by value, weight or quantity, update the unit cost of stock already on the shelf, and keep VAT out.
How does VAT on imports work: reverse charge, Box 6 and the TRN-customs link?
A registered importer declares import VAT on its own return, not at the port. Article 48(1) of the VAT law treats the importer as making a taxable supply to itself (FTA). The conditions: registered for VAT at the time of import, and the FTA holds the importer's own customs registration number; the tax is declared and paid in the return for the period of supply (Cabinet Decision No. 52 of 2017, Article 48, as amended, FTA consolidation of 18 September 2025).
Box 6 is auto-populated from imports declared under your customs registration number, which should be linked to your TRN; the value includes duty and any excise, and 5% VAT is applied as output tax. The same VAT is recovered in Box 10, to the extent the goods are used for taxable supplies. The FTA asks you to check that Box 6 matches the declarations submitted in the period (FTA VAT Returns User Guide, August 2021).
The return and payment are due within 28 days of the end of the tax period (FTA, updated 16 May 2024). From 1 January 2026, under Federal Decree-Law No. 16 of 2025, taxable persons no longer issue self-invoices under the reverse charge but must keep the supporting documents (Ministry of Finance, 3 December 2025), so each import record needs the supplier invoice, the declaration number and the payment. Article 50 treats goods held or supplied in a qualifying designated zone as outside the UAE for VAT, but only goods, and only while they are not consumed there (FTA). Services in the zone, goods consumed there, goods moved to the mainland and stock shortages are all taxed as UAE supplies or imports, and the zone business itself stays resident in the UAE (Executive Regulation, Article 51), so stock locations must carry that status and a count shortage in the zone is a tax event. See how to file the VAT-201 on EmaraTax.
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FIFO or weighted average: which stock valuation should you pick?
Either, applied consistently and provable. IAS 2 permits FIFO or weighted average for interchangeable items and measures inventory at the lower of cost and net realisable value (IFRS Foundation). For corporate tax, Ministerial Decision No. 114 of 2023 applies IFRS, allows IFRS for SMEs where revenue does not exceed AED 50,000,000, and allows cash-basis statements where revenue does not exceed AED 3,000,000 or, exceptionally, with FTA approval (Ministry of Finance, May 2023).
Weighted average suits mixed shipments that land at a different cost every month; FIFO suits batch or expiry-dated goods. The record matters more than the choice: Cabinet Decision No. 74 of 2023 requires inventory statements with quantities and values at the end of any tax period, and stock-count records (FTA, effective 1 August 2023).
What exchange rate applies when suppliers invoice in dollars, euros or yuan?
Three rates; store each one. The dirham has been pegged to the US dollar at 3.6725 since November 1997 (The National, 22 November 2024), so the exchange risk sits in euro and yuan purchases. Article 69 of the VAT law governs your own tax invoices: a sale invoiced in a foreign currency is converted at the Central Bank rate on the date of supply, and Article 67 requires you to issue that invoice within 14 days of supply (FTA). A foreign supplier's invoice is not a UAE tax invoice and carries no 14-day rule; for imported goods the VAT value is the customs value, and customs fixes its AED amount at the declaration-date rate.
Require: invoice currency and amount, the AED equivalent and rate, a realised exchange difference on settlement, and a revaluation of open foreign-currency payables at period end. Multi-currency accounting is part of the Xrero accounting module.
Spreadsheets, accounting-only software or ERP: what is the real difference for a trader?
Whether the goods, the duty and the tax live in one record. A spreadsheet can compute a landed cost but cannot post it to stock, and the most recent field audits in Panko's 2000 review found errors in at least 86% of the real organisational spreadsheets they examined (Panko, University of Hawaii, EuSpRIG 2000).
| Capability | Spreadsheets | Accounting-only | ERP |
|---|---|---|---|
| Landed cost into stock | Manual | Expense line | Per receipt, by value, weight or quantity |
| Box 6 reconciliation | Manual list | Rare | Declaration number per import, by period |
| Stock valuation | Formula | One quantity | Per warehouse, per period end |
| Multi-warehouse transfers | Separate tabs | No | Locations and in-transit stock |
| Batches and expiry | No | No | Lot numbers on receipt and delivery |
| Audit trail | None | Partial | User, time and change per record |
Receivables matter because corporate tax applies at 9% on taxable profit above AED 375,000, with 0% below it, for financial years starting on or after 1 June 2023 (Ministry of Finance): margin per shipment and cash per customer are the numbers to watch. Ask for ageing buckets, credit limits that stop a sales order, post-dated cheque tracking and bilingual statements.
What does it cost over three years, and which dates belong on the calendar?
Count licence per user, setup, training, data migration and scanners in AED over three years. Xrero is AED 99 per user per month with setup from AED 2,999, a 15-day trial included and a 30-day money-back guarantee (pricing). The exposure: AED 10,000 per violation for missing records, AED 20,000 on repetition within 24 months; AED 1,000 for a late return; and from 14 April 2026 a monthly penalty of 14% per annum on unsettled tax (Cabinet Decision No. 40 of 2017 as amended by No. 129 of 2025, Ministry of Finance). Records are kept 5 years after the tax period for VAT (Cabinet Decision No. 74 of 2023, Article 3) and 7 years for corporate tax (Federal Decree-Law No. 47 of 2022, Article 56), longer under audit or dispute, so a trader keeps stock records for 7 years.
- VAT registration: mandatory at AED 375,000, voluntary at AED 187,500 (FTA, updated 6 April 2026).
- E-invoicing pilot 1 July 2026; revenue of AED 50 million or more live 1 January 2027 (Ministry of Finance, 29 September 2025); that tier's service-provider deadline is now 30 October 2026 (Ministry of Finance, 10 May 2026).
- Below AED 50 million: provider by 31 March 2027, live 1 July 2027 (Ministry of Finance). See our e-invoicing dates guide; the Xrero team can be asked about timelines.
The evaluation checklist: 20 questions to ask any vendor before you sign
Inventory. 1. One item in several warehouses, with transfers and in-transit stock? 2. Quantity and value per warehouse at any past period end? 3. Stock counts that post an adjustment with a reason and user? 4. Lot numbers and expiry dates from receipt to delivery? 5. A barcode scanner as keyboard input?
Landed cost. 6. Freight, insurance, duty and clearing invoices attached after arrival? 7. Allocation by value, weight or quantity? 8. Unit cost of received stock updated? 9. VAT kept out of stock value?
VAT and imports. 10. Customs declaration number on each import? 11. Imports listed by tax period for Box 6? 12. Reverse-charge VAT posted automatically? 13. VAT-201 figures ready to file on EmaraTax? 14. Stock locations marked as designated zone?
Currency. 15. Invoice currency, rate and AED equivalent on each purchase? 16. Realised and unrealised exchange differences posted?
Receivables and documents. 17. A credit limit per customer that blocks an order? 18. Invoices and statements in Arabic and English?
Audit trail and cost. 19. User, time and change on every entry? 20. Full three-year cost in AED, including setup, training and migration?
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Frequently asked questions
Is customs duty part of the stock cost or an expense?
Part of the stock cost. Duty is not recoverable, so it belongs in the landed cost with freight, insurance and clearing fees. Import VAT is declared as output tax in Box 6 of the return and recovered in Box 10 when the goods are for taxable supplies, so it stays out of stock.
Do I pay import VAT at customs or on my VAT return?
On the return. Under Article 48 of the VAT law a registered importer accounts for the VAT as a supply to itself, in Box 6 of the VAT-201, provided it was registered for VAT at import and has given the FTA its own customs registration number, linked to the TRN.
Why does Box 6 not match my supplier invoices?
Box 6 is built from customs declarations, not invoices: customs value plus duty and any excise, at the declaration-date rate. The FTA asks you to check it against the declarations filed in the period, so the software must list imports by period.
Do I still have to issue a self-invoice for reverse-charge imports in 2026?
No. From 1 January 2026, under Federal Decree-Law No. 16 of 2025, taxable persons no longer issue self-invoices under the reverse charge. Keep the supplier invoice, customs declaration and payment record.
FIFO or weighted average: which should a UAE trader use?
Either is allowed under IAS 2 for interchangeable goods. Weighted average is simpler for mixed shipments; FIFO suits batch or expiry-dated stock. Apply one consistently and report quantities and values at each tax period end.
About the publisher: Xrero (xrero.com; in Arabic اكسريرو) is a Dubai-based business software company. Xrero is not Xero and is not connected to it.
Page updated 12 September 2026.