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Ordering online? Gulf shoppers must pay 5% duty on all overseas deliveries of Dh300+

Dubai: The Gulf states - want its online shoppers to buy from local ecommerce portals as much as possible. To convince them, they have lowered the customs duty ceiling - from Dh1,000 to Dh300 (and their equivalent) - on orders placed with international shopping sites and delivered here.

Earlier, up to Dh1,000 worth of goods could be bought from overseas portals by a resident without attracting the duty of 5 per cent. Now, that ceiling is set at a flat Dh300 per order.

The GCC is implementing these moves as part of a wider push by customs authorities in the Gulf to unify their tariffs on ecommerce orders. The Dubai Customs has also updated its individual processes as part of the emirate's ecommerce and blockchain initiative.

A Gulf-wide effort on ecommerce
The Gulf states have a 'unified strategic framework' on ecommerce, which was prepared by the Secretariat of the Gulf Cooperation Council. There is also a GCC working group in charge of studying aspects related to ecommerce. The Dubai Government has its own strategy related to online buying and selling and which "aims to strengthen Dubai’s status as a global logistics hub for cross-border e-commerce operations and accelerate trade growth in the region". Ecommerce to contribute Dh12 billion to Dubai’s GDP by 2023. Dubai has also developed a cross-border ecommerce platform based on blockchain technology.

“Local ecommerce portals offer more or less the same merchandise and the price differences too have come down between local and international shopping portals,” said a source at a leading ecommerce business. “Even then, shoppers in Dubai were still placing a sizeable number of orders with overseas shopping sites.

“By extending the 5 per cent customs duty coverage to orders valued even under Dh1,000, it’s clear that the authorities are putting their considerable support behind local shopping portals. And also generating more as customs duty from widening the net.”

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Major win for local

For local ecommerce sites as noon and amazon.ae, anything that has more shoppers buying through them would be a big boost to their transaction volumes. About five or six years ago, as much as 70-80 per cent of online shopping orders placed by UAE residents were with overseas sites. Now, that’s percentage has come down to around 40-50 per cent, according to market sources.

Of these, a sizeable share would be in the Dh1,000 plus range per order, especially if these are fashion and accessory orders. As such, they would be charged the 5 per cent.

“But there was always a sizeable percentage of orders of up to Dh1,000, with cosmetics being particularly popular,” said the source. “These orders could be diverted to local shopping portals or stores, especially if shoppers find that paying the extra 5 per cent on customs duty reduces the gap with local prices.”

The lowering of customs duty exemption to Dh300 could thus be a decisive win for local online marketplaces and shopping sites, especially those featuring a heavy mix of fashion, accessories and cosmetics.

Dubai's big ecommerce push
Companies wishing to practice e-commerce can register or add the activity in Dubai Customs’ customer registration system without the need to add the activity to their trade license. Goods whose value does not exceed Dh300 and imported for personal purposes via postal parcels, courier companies and companies are exempt from customs duty.

Returns policy

The revised Dubai customs duty has this to say on returns – “Personal goods returned via companies and on which customs duty is proven to have already been levied shall be exempted from customs duties if returned within 60 days from the date of their exit.”

A win for local ecommerce
UAE based online shopping sites and marketplaces have been doubling down with aggressive pricing and frequent promotions across categories. Offers on fast moving consumer goods are revised almost every day… or even within hours. But it’s with categories such as fashion, accessories, skincare, specialised products and books that shoppers here tend to place their orders with overseas sites. Sure, the shipping charges add a few to the total, but if the overall order comes in less than Dh1,000, the customs duty was exempt. Until now…

Another bumper phase

Even as malls and shops become crowded again, Dubai and UAE residents are not letting go of the online shopping habits they picked up – or perfected – during the pandemic phase last year. Even the most conservative growth estimates suggest another 15-20 per cent gain in online volumes and value during this year.

The latest move by Dubai with the customs duty could add a few percentage points to that total.