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Abu Dhabi, UAETuesday 19 June 2018

VAT and customs tax on high-cost items from abroad deter UAE's online shoppers

Additional costs have made ordering from abroad an expensive endeavour 

Online shopping is heating up in the Middle East, but additional fees tagged onto orders from international e-tailers is making local mark-ups more reasonable. Pawan Singh / The National
Online shopping is heating up in the Middle East, but additional fees tagged onto orders from international e-tailers is making local mark-ups more reasonable. Pawan Singh / The National

Ordering products online from abroad is no longer the go-to option for shoppers seeking cheaper alternatives to often marked-up prices found in the UAE.

This week the Federal Tax Authority said all purchases made through online shopping portals are subject to the same 5 per cent VAT as other purchases nationwide.

The confirmation laid to rest any doubts that international online orders were immune to the levy implemented on January 1.

However, an often overlooked charge is the custom duty that stamps a 5 per cent surcharge on any item worth more than Dh1,000 ordered from abroad and received in the UAE.

The combination of the two charges makes any item worth more than Dh1,000 subject to an additional 10 per cent surcharge.

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The increment means ordering products from abroad online is no longer the cheaper option, particularly after taking into account delivery charges, handling fees or additional tax from the country of origin.

For SM, 31, who is an avid online shopper, the extra charges are making him more mindful of his purchases.

“It’s almost not worth it anymore, I need to plan my purchases more and bunch them up. Almost all my orders are expensive but now, with all the fees, it will make me order less and look for alternatives,” he said.

What was once a clear cut decision has now been muddied by added costs and greater competition from local retailers.

A classic example is the iPhone. Apple’s latest flagship can be bought for Dh4,304 locally from the Apple store. However, many in the country would opt to order the phone from abroad not only because it’s cheaper (Dh4,017) but also because it comes with perks like FaceTime.

Ordered today, the cost of the iPhone X from abroad could be subject to several handling fees, including the combined 10 per cent of its value (from VAT and customs duty) and charges for a courier service to deliver it from the US to the UAE.

The final price could be as high as Dh4,500.

“There are other costs that the user is not aware of,” said Ronaldo Mouchawar, chief executive of souq.com.

“Things that you can’t get from ordering abroad that we provide for users. Even before VAT, we were offering benefits that the consumers risk when ordering online internationally.”

Services that users often overlook, the executive said, include warranties, local electrical output, same-day logistics and cash-on delivery options.

Having recently been acquired by Amazon, the company has also grown to include millions of products online and has improved their services.

The mark-up to big-money orders has pushed local shoppers to be more intrepid of their purchases or all-together gravitate towards local online websites, which are still not on par with e-retailers abroad but are in many cases more convenient.

“Depending on the price of the product, I might consider locally. For example, if I find a local online application that is easier to use and lower in price I will definitely go for it instead of an online store that is based abroad,” said Ayesha Khoori, communications employee at an investment company.

Despite additional costs, the added convenience of ordering online is unlikely to deter Ms Khoori, and others, from purchasing items that are not provided in the UAE or GCC.

“I am more mindful of how much I am willing to spend online, but it is still the more conventional method for me and I will most probably continue to use it, especially that I order many things from the US and the UK and they are not always available here,” said Ms Khoori.

The custom duty, which has been implemented since 2002, and is GCC-wide. Some products ordered from abroad are exempt from additional costs and others are subject to even higher taxes and fees.