In logistics, where the movement of goods significantly influences global trade, the United Arab Emirates (UAE) emerges as a strategic hub due to its well-connected sea and air routes. As a central figure in global transit and re-exportation, the UAE’s shipping and logistics sector is pivotal, subject to specific Value Added Tax (VAT) considerations.
VAT’s impact varies based on factors like transport mode, goods location, and essential services such as shipment, cargo packaging, etc.
This article covers VAT for courier services in UAE, examining classifications based on transportation modes and supply locations. Most transportation coming in and leaving the UAE is either exempt from VAT or taxed at a 0% rate.
However, some types of transport are subject to the standard VAT rate of 5%. The article discusses the complexities in the landscape of VAT in the UAE’s shipping and logistics industry. Now Consultant plays a key role in ensuring VAT compliance for companies engaged in shipping and logistics.
Is VAT Applicable On Couriers In UAE?
Given the UAE’s central role in global transit and re-exportation, understanding the VAT impact on the shipping and logistics sector is crucial. With strategic investments in infrastructure like the Dubai Logistics Corridor, upgraded seaports, airports, Jebel Ali Free Zone Authority (JAFZA)development, and airport expansions, the UAE has outpaced its GCC counterparts.
The UAE VAT Law specifies that the intricacies of VAT impact on shipping and logistics hinge on factors such as transport mode and goods location, covering various services like shipment, cargo packaging, Customs document preparation, container management, loading, unloading, storage, and transportation.
VAT rates in the UAE logistics sector depend on the transportation mode (sea, air, or road) and supply location (within the UAE or internationally), leading to zero, standard, or out-of-scope classifications based on these factors.
VAT Ratings on Couriers or Shipments in UAE
1. Value Added Tax (VAT) on the International Movement of Goods
The FTA considers any international transportation of goods that starts or finishes in the UAE as a zero-rated supply. This is applicable if the vessel transits through the UAE during transport.
2. Value Added Tax (VAT) On Domestic Goods Transportation:
If goods are transported solely within the UAE, they do not qualify for a zero rating. Under these circumstances, the vessel’s movement within the UAE is subjected to the standard VAT rate of 5%.
3. VAT On Vessels In The Context Of International Transportation:
Sometimes, a vessel might participate in coastal operations or transport goods locally within the UAE as a component of international shipping. These local movements are also eligible for zero-rating when part of international transportation. Businesses must have supporting documents to prove the movement was part of international transportation.
4. Value Added Tax (VAT) Rate Applicable To Transportation Ships:
A ship used for the commercial transport of goods is given a zero VAT rating. This is applicable to a ship expressly crafted or modified for commercial purposes, excluding those designed or altered for recreation, pleasure, or sports.
5. Value Added Tax (VAT) Rate for Cross-Border Commerce:
Cross-border trade or high seas sales mean moving goods outside the UAE without using a UAE port. For example, think about goods being exported from the US to be delivered in KSA. The operators of the vessel or container manage the cross-border trade and invoice the customer, potentially located in the UAE. Because the supply’s origin is outside the UAE, this cross-border trade is considered outside the scope of VAT.
NOW Consultant Services
Now Consultant plays an integral role for companies within the UAE’s shipping and logistics sector, offering invaluable expertise through qualified tax agents to ensure seamless VAT compliance. Determining VAT applicability based on specific criteria can be intricate, yet as a reputable VAT consultancy firm, we specialize in supporting logistic businesses to streamline the VAT process.
Remember that failing to comply with VAT regulations may result in substantial fines from the FTA, so hire the services of Now Consultant’s highly qualified tax agents essential for ensuring smooth business operations while adhering to VAT requirements.
Is VAT Applicable On Delivery Charges In The UAE?
Yes! In the UAE, Value Added Tax (VAT) does not apply to incoming and outgoing delivery charges, as they fall under the zero VAT rate. However, a 5% VAT is applied to the delivery charges of moving goods locally within the UAE.
Is VAT Applicable On All Types Of Cargo In The UAE?
In the UAE, inbound and outbound cargo is zero-rated, while the cargo transport of goods locally is subject to VAT at 5%.