Importer of record and Incoterms: who pays, who recovers, who registers
The delivery term on a Gulf contract decides who imports, who registers for VAT and who can recover it. Here is how EXW, FCA, DAP and DDP play out across the Gulf, with a machine sold three ways.
Why the importer of record decides so much
Every import into a Gulf state has a name on the customs declaration: the importer of record. That party is responsible to customs for the duty and for the accuracy of the declaration, and, in the VAT states, it is the party that pays import VAT and, if entitled, recovers it. Who that party is follows from the commercial deal, and in particular from the delivery terms the buyer and seller have agreed, usually expressed as an Incoterm. A choice that looks like logistics, ex works or delivered duty paid, therefore carries tax consequences that can outweigh the freight cost.
Three things turn on it. Who must be registered with customs and, often, for VAT in the country of import. Who can recover the import VAT, which is a real cost for the wrong party and a cash-flow item for the right one. And who carries the risk of a wrong value, a wrong tariff code or a missing certificate. A Gulf trade deal that does not answer these questions explicitly will answer them by default, and the default is rarely what either side intended.
EXW, FCA, DAP and DDP
Under ex works and free carrier terms, the buyer arranges transport from the seller's premises or hand-over point and handles import formalities, so the buyer is the importer of record at destination. That is the cleanest structure for tax: the buyer clears the goods, pays the duty and import VAT, and recovers the VAT if registered, and the seller has no presence or obligation in the buyer's country. The weakness of ex works in the Gulf is export: the seller often still has to appear as exporter on its own country's export declaration, which matters for proving a zero-rated export, so free carrier usually fits better.
Under delivered at place, the seller delivers to the buyer's premises but the buyer clears import, so the buyer remains importer of record; this is the most common compromise for intra-Gulf trade, because the seller controls transport and the buyer controls customs and VAT. Under delivered duty paid, the seller clears the goods into the buyer's country and pays duty and import VAT, becoming the importer of record. In the Gulf that usually means the seller then makes a supply of goods located in the buyer's state, which brings it within that state's VAT: in Saudi Arabia and Bahrain, a non-resident making such supplies must register, in Saudi Arabia with a tax representative, and in the UAE a non-resident importer needs a customs registration and faces its own VAT questions.
Only the right party can claim it
Import VAT is recoverable, in principle, by the registered business that imports goods for its taxable activities. In practice the authorities look at the customs declaration and expect the claimant to be the importer of record and, usually, the owner of the goods. Problems arise when the name on the declaration is a freight forwarder, a logistics provider or a related company that does not own the goods, or when a foreign seller appears as importer without being registered. In each case the party that bore the VAT may be unable to recover it, and the VAT becomes a cost.
In the UAE, registered importers account for import VAT through their VAT return, linked to their customs registration, which makes the link between declaration and return direct; a mismatch between the two is easy for the authority to see. Saudi Arabia expects the importer of record to be the party deducting the import VAT, and Bahrain's rules work in the same way. The safest structure is simple: the party that owns the goods at import, and will sell them in that country, should be the importer of record, registered for customs and VAT.
What goes into the duty base
Gulf customs value goods on a CIF basis: the price of the goods plus the cost of transport and insurance to the point of entry. The Incoterm affects which of those costs are in the invoice and which must be added. Goods sold ex works need freight and insurance added for the declaration; goods sold DDP include costs beyond the border that should not be in the customs value. Declaring the wrong figure leads to reassessment, and where related parties are involved, customs may examine whether the price itself reflects an arm's-length value.
Import VAT is then charged on the customs value plus duty and any excise, so every error in the customs value flows through into VAT. The commercial invoice, the Incoterm, the freight and insurance documents and the declaration need to tell the same story. For businesses with regular flows, a written valuation approach agreed with the broker, and for related-party trade a transfer pricing policy that customs officers can follow, prevent most disputes.
Saudi Arabia introduced rules in 2026 treating certain electronic marketplaces as the deemed supplier of goods sold through them. A seller using a marketplace to reach Saudi consumers should confirm who is treated as supplier, and who as importer, before shipping, because the marketplace rules can change both answers.
The same machine sold three ways
A UAE distributor sells an industrial machine worth AED 500,000 to a Saudi manufacturer. On FCA Dubai terms, the Saudi buyer collects the machine at the distributor's warehouse, the distributor zero-rates the export with its export declaration, and the buyer imports it into Saudi Arabia, paying any duty difference above the 5% already paid in the UAE and 15% import VAT, which it recovers. The distributor has no Saudi obligations.
On DAP Riyadh terms, the distributor arranges transport to the buyer's factory, but the buyer clears the machine through Saudi customs; the tax result is the same as under FCA, and the distributor only has to keep the export evidence and the transport documents. On DDP Riyadh terms, the distributor clears the machine into Saudi Arabia, pays the duty and the 15% import VAT, and then makes a supply of goods in the Kingdom. It must register for Saudi VAT with a tax representative, charge 15% VAT to the buyer on an invoice that meets Saudi requirements, and recover the import VAT through its Saudi returns. The commercial difference between DAP and DDP is a few days of customs work; the tax difference is a full Saudi registration.
The example shows the mechanics. Actual duty depends on the tariff code and the Saudi rate for the machine, and VAT depends on the customs value and the parties' registrations.
A practical rule for Gulf trade
For trade between Gulf states, the sensible default is that the buyer imports: FCA or DAP, with the buyer as importer of record, registered with customs and for VAT in its own country, and the seller keeping proof of export to support its zero rate. Delivered duty paid makes sense when the seller already has, or wants, a registered presence in the buyer's country, typically because it sells there regularly and its customers expect a local invoice. In that case the cleaner path is often a local entity rather than a non-resident registration, because a local company can import, hold stock, invoice under local e-invoicing rules and bank locally.
Whatever the choice, the contract should name the Incoterm with its version and place, say who is importer of record, allocate duty differences and certificates, and require each party to provide the documents the other needs: export declarations, proof of duty paid at first entry, certificates of origin and conformity. Those few lines decide where tax is paid, who can recover it and who carries the risk when something at the border goes wrong.
A common and costly shortcut
Small importers often let their freight forwarder clear goods in the forwarder's own name, because the importer has not yet obtained a customs registration. The goods arrive, but the import VAT is then recorded against the forwarder, which does not own the goods and cannot recover the VAT in a meaningful way, while the actual owner cannot claim VAT it did not pay on its own declaration. The result is a VAT cost that should have been neutral, and sometimes questions about who really imported the goods. Obtaining a customs registration in the importer's own name before the first shipment avoids this, and is a small task compared with untangling it afterwards.
Questions we get asked first
What is an importer of record?
The party named on the customs declaration as importer, responsible for duty and the accuracy of the declaration and, in VAT states, for paying and recovering import VAT.
Which Incoterm is best for trade between GCC states?
Usually FCA or DAP, with the buyer as importer of record in its own country and the seller keeping proof of export. DDP suits sellers that already have a registered presence or local entity in the buyer's country.
Does selling DDP into Saudi Arabia require VAT registration?
Generally yes. The seller imports the goods and then supplies them in the Kingdom, so as a non-resident it must register for Saudi VAT with no threshold and appoint a tax representative.
Who can recover import VAT?
The registered importer of record that owns the goods and uses them for taxable activities. A freight forwarder or unregistered foreign seller named as importer can cause the VAT to become unrecoverable.
How do Incoterms affect the customs value?
Gulf customs value goods on a CIF basis. Ex works sales need freight and insurance added; DDP prices include costs beyond the border that should be excluded.
What should a Gulf trade contract say about customs?
The Incoterm with version and place, who is importer of record, who bears duty differences, and which documents each party provides, including proof of duty paid at first entry and certificates of origin.
Decide who imports before you decide the freight
In Gulf trade the Incoterm decides who is importer of record, who must register, who recovers import VAT and who carries the risk at the border. Default to the buyer importing, keep export evidence, value goods consistently, and choose DDP only when you are ready to register, or better, establish locally in the buyer's country.
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This article is general information, current as of 2026, and is not advice for any specific situation. Confirm current rules with the MOIC, the NBR or the relevant authority before acting.