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Accounting · Logistics & Freight

Getting the Books Right in a Dubai Freight Business

A warehouse loading bay with wrapped pallets lined up beside an open roller shutter door, a forklift parked to one side, cool daylight.

Last reviewed by the Exiloz tax team against the UAE legislation in force on that date. Tax law moves — confirm any figure against tax.gov.ae before you act on it.

One freight invoice, three VAT treatments

A Dubai freight forwarder's invoice rarely carries just one kind of charge. The international leg is usually zero-rated, local delivery is usually taxed at 5%, and customs duty paid for the client can sit outside VAT entirely. Coding those lines wrongly distorts both the VAT return and the reported profit. Accounting for freight companies has to separate them on every job.

Logistics margins are measured job by job, not month by month. Money that was never theirs passes through their bank accounts every week. The books have to show that clearly, or the profit figure and the VAT position both become unreliable. This guide covers international and local freight, disbursements, job costing and input VAT on trucks and delivery vans.

How is international freight treated for UAE VAT?

It is usually zero-rated under Article 45(2) of the UAE VAT Law. That covers international transport of goods and passengers that starts or ends in the UAE, or passes through its territory. Transport-related services connected with that movement are included.

Zero-rated is not exempt. Because the supply is still taxable at 0%, the forwarder can recover VAT on its own costs, often ending up in a refund position. For every zero-rated shipment, keep the bill of lading or airway bill, the customs declarations and the client contract on file together.

Quick Answer

International freight starting or ending in the UAE is usually zero-rated under Article 45(2) of the UAE VAT Law. Forwarders can still recover input VAT on their own business costs.

Is local delivery inside the UAE subject to VAT?

Yes, moving goods within the UAE is normally a domestic supply taxed at 5%. A last-mile delivery from a Jebel Ali warehouse to a customer in Deira is local transport. That still holds when a different business handled the goods' earlier international leg.

Article 33(1)(d) of the Executive Regulation zero-rates a local leg when the same supplier also provides the international transport of those goods. A separate local haulier's delivery usually stays standard-rated at 5%. Local passenger transport is different, because Article 46 of the VAT Law makes it exempt.

Quick Answer

Local goods delivery within the UAE is normally a domestic supply taxed at the standard 5% rate. Local passenger transport is exempt under Article 46 of the UAE VAT Law.

When can a forwarder recharge customs duty without VAT?

When the payment is a genuine disbursement under the FTA's Public Clarification VATP013. The client must receive the goods or services, owe the payment and hold the invoice in its own name. The client must also authorise the forwarder to pay on its behalf.

It must also be additional to the forwarder's services, shown separately and recovered at exactly the amount paid. Adding even a small mark-up turns it into the forwarder's own supply, which then carries VAT. Charge a separate handling fee instead and keep the duty at cost.

Quick Answer

A UAE freight forwarder can recharge customs duty outside VAT only if it meets all the FTA's VATP013 disbursement principles. Any added mark-up turns the recharge into a taxable supply.

How should Dubai logistics companies account for disbursements and jobs?

Keep disbursements out of revenue, in a balance sheet account that clears when clients pay. Take one illustrative invoice with AED 18,000 of sea freight at 0% and AED 1,500 of delivery at 5%. It adds an AED 800 handling fee at 5% and AED 6,000 of duty at cost.

The client pays AED 26,415 including AED 115 of VAT, but the forwarder's revenue is AED 20,300. Give every shipment a job number carrying its carrier and port costs. Accrue late carrier invoices at month-end for a true monthly margin.

Quick Answer

Freight forwarders in the UAE should keep disbursements out of revenue and cost every shipment by job number. Accrue late carrier invoices so monthly job margins stay accurate and comparable.

Can a logistics company recover VAT on its trucks?

Usually yes, for commercial vehicles used only for the business. Article 53(1)(b) of the VAT Executive Regulation blocks input tax on motor vehicles available for personal use. Trucks and delivery vans used solely for deliveries generally fall outside that particular block.

A pickup that a driver takes home every evening may fall on the wrong side of the line. Keep a written vehicle policy and usage logs showing how each vehicle is actually used. Our guide to what outsourced accounting costs covers the monthly close that keeps those records current.

Quick Answer

UAE logistics companies can usually recover input VAT on trucks and vans used only for business purposes. Vehicles also available for personal use fall under the Article 53 block instead.

Get Freight Books You Can Trust

Exiloz sets up job-level costing, VAT coding for international and local legs, and a clean disbursement ledger. Ask about accounting for freight companies.

Frequently Asked Questions

Is port handling at destination zero-rated?

Sometimes, when it is closely tied to the international movement as a transport-related service. No published list settles every destination charge, so decide each recurring charge once and document it.

Does disbursement money count as revenue for Small Business Relief?

No, genuine disbursements are not the forwarder's income, so they should not sit in revenue. Booking them as revenue could wrongly push the business past the AED 3 million limit.

What evidence supports zero-rating international freight?

Keep the bill of lading or airway bill, customs declarations and client contract for each shipment. Without them, zero-rating becomes hard to prove, and the FTA may then challenge it.

Is a handling fee subject to VAT?

A handling fee is the forwarder's own service, so it follows the VAT treatment of that service. For local UAE handling, that is normally 5%, invoiced as a separate line.

Why do freight forwarders often receive VAT refunds?

Their international freight is usually zero-rated, so they charge little output VAT on much of their revenue. They still pay 5% on many local costs, which they can then recover.

How does related-party freight affect Corporate Tax?

Where one group company carries goods for another, the price must meet the arm's length standard. Put the written agreement on file before the year-end, not after it is questioned.

When should carrier costs be recorded if invoices arrive late?

Accrue the expected carrier cost at month-end, then clear the accrual when the carrier's invoice finally arrives. That keeps each month's job margins accurate rather than shifting costs between periods.

Does a freight forwarder pay Corporate Tax on disbursements?

No, genuine disbursements are pass-through amounts, not income or expenses of the forwarder itself. UAE Corporate Tax applies only to the forwarder's own profit, calculated from correctly separated year-end accounts.

What happens if a disbursement is recharged with a mark-up?

Under the FTA's VATP013 principles, a marked-up recharge is no longer a disbursement. It becomes the forwarder's own supply, and VAT applies according to the nature of that underlying supply.

Can Exiloz set up job costing for a freight company?

Yes, Exiloz sets up job numbers, VAT codes for each charge type and a disbursement account. That lets owners see profit by lane and customer without stopping daily freight operations.

Main Takeaways

International freight starting or ending in the UAE is usually zero-rated, while local delivery is taxed at 5%. Customs duty paid for clients stays outside VAT only when all six VATP013 disbursement principles are met. Keep disbursements out of revenue and cost every shipment by its job number. Trucks and vans used only for business usually carry recoverable input VAT.

Separate Every Charge Before It Reaches the Return

Freight accounting in Dubai turns on separating each charge on an invoice correctly. International legs, local delivery, handling and customs duty each follow a different VAT treatment and evidence trail. Disbursements are the charge most often mishandled, because even a small mark-up changes the whole treatment. Job costing then shows which lanes, routes and customers actually make the business money.

Split every charge type into zero-rated, standard-rated or disbursement and fix the codes in your system. Move customs duty paid for clients into a separate disbursement account at cost. File transport documents by job number, so every zero-rated shipment can be proved quickly if asked. Exiloz can set up the VAT coding and job costing without disrupting your daily operations.

Sources & References

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