According to UAE VAT Law, the implications of VAT for the shipping and logistics industry are complicated and depend on several variables, such as the location of the item supplies and mode of transportation. The rules relevant to transport-related services specify how the shipping and logistics industry is subject to VAT. According to the UAE VAT Law’s Article (1), transport-related services include shipment, packaging and securing cargo, preparation of customs documents, container management, loading, unloading, storing, and moving of goods, and other related services important to carry out transportation.
You may have tasks including VAT filing, right? Discover the best VAT consultants in Dubai and the UAE with top VAT on logistics services, including VAT registration. Leave your tasks to them and concentrate on the core areas of your business. The logistics industry’s VAT rating is either zero, standard, or out of scope, depending on the transportation mode, such as air, sea, or road, and the destination, which is inside the UAE or beyond.
VAT Rating for Goods Transportation in the UAE Shipping Sector
- VAT on International Goods Transportation
- VAT on Goods Local Transportation
- Local Ship Movement in the Context of International Travel
- Rate of VAT on the Transportation Vessel
- Cross-border Trade VAT Rate
The FTA treats any foreign freight that begins or ends in the UAE as a zero-rate supply. If the ship travels via the UAE during the procedure, the transportation is still considered a zero-rated supply.
Goods transportation that takes place inside the UAE is not eligible for the zero-rating. The normal 5% VAT rate would apply to the vessel’s travel within the nation.
As part of global transportation, the vessel will occasionally perform coastal runs or local cargo movement within the UAE. These local transfers that are part of global travel are likewise eligible for zero- ratings. The firms must provide documentation to back up their claim that the movement was managed as part of global shipping.
A vessel with a zero VAT rating is one that is used for the transportation of goods for a profit. Zero-rating is applicable to the delivery of a ship that is planned or adapted for use for business purposes, but it should not be planned or modified for sports, pleasure, or leisure, per Article No. 34 of the VAT Law.
Transporting goods outside of the UAE without the involvement of a UAE port is known as cross-border trade or high-seas sales. Take the export of products to Saudi Arabia from the US, for instance. The cross-border trade is completed by the vessel or container operators, who then forward the invoice to a potential UAE-based client. Cross-border trade is recognized as exempt from VAT as the supply’s point of origin is outside of the UAE.
Accounting for Taxes in Compliance with UAE VAT Law
There are three modes of transportation for goods: air, sea, and road. The cargo volume and the last destination have an influence on the mode of transportation that is chosen. Whatever the mode, a reputable company with VAT on logistics services and other offerings, like register for VAT, will be easy and streamline procedures. We are one of the best VAT consultants in Dubai and the UAE, with VAT filing and other core services for you. Now, let’s check the transportation modes and the FTA’s definition of each one’s VAT rating:
- Transportation by air
- Transportation by sea
- Transportation by Road
According to the VAT law in the UAE, the supply of an airplane is zero-rated for the movement of products. The aircraft shall not be built for leisure, sports, or recreation; instead, it must be designed or modified for the aim of carrying passengers or cargo on commercial flights.
There will be a zero-rated supply if a boat, ship, or floating structure is built for commercial use. It is not suitable to design or modify the ship for use in sports, entertainment, or leisure activities.
The UAE VAT Law also mentions how the VAT is applied to the transportation of products by road, much like it does for the other modes of transportation that were already discussed. When a bus or train is designed or modified to be used for public transportation with ten or more passengers, the VAT rate is zero.
Support from the Best VAT Consultants UAE
To promise VAT compliance, businesses in the shipping and logistics industry in the UAE need the professional support of licensed tax agents. Specific regulations relevant to the transportation of goods have been issued by the FTA, and the place of supply and mode of transit are among the variables that determine the VAT rating. It can be very challenging to determine the tax applicability based on these factors, which is where reputable VAT consulting firms can help businesses.
We are proud of our name among the reputable VAT consultants in Dubai and the UAE, offering VAT registration and other services to promise smooth procedures. Through VAT filing, VAT returns, and VAT deregistration, our team helps businesses ensure compliance with VAT regulations. In order to help the companies manage their functions, our team of highly qualified tax agents assures VAT compliance. So, don’t worry about the potential failure to do so, which may result in significant fines from the FTA. Now experience the best VAT on logistics services with us. Contact us today!
