UAE logistics businesses should handle their 0% rated tax status with extreme care

UAE logistics businesses should handle their 0% rated tax status with extreme care

Whether it is Value Added Tax (VAT) or Corporate Tax, the logistic service industry needs to pay special attention to the scope of tax concessions.

As per global practices, international transportation is generally zero-rated under the UAE VAT laws. The international transport of passengers or goods – whether it starts or ends in the UAE or passes through its territory - is zero-rated.

An interesting ambiguity exists for international transportation originating from a place outside the UAE. If the place of supply is outside UAE, then such transportation services should be outside the scope of UAE’s VAT. The logistics industry, however, should evaluate whether such services are zero-rated or outside the scope of the VAT regime altogether.

Zero-rated?

Transport-related services mean shipment, packaging and securing cargo, preparation of customs documents, container management, loading, unloading, storing and moving of goods, or any another closely related services. These are generally provided under following two scenarios:

Services provided along with international transportation. Services provided independently without international transportation.

In my experience, many logistic companies in UAE consider transport-related services as zero-rated in both scenarios. A pertinent question remains whether such services are indeed zero-rated, especially in the second scenario?

The zero-rating apparently applies on transport-related services provided with international transportation.