VAT on Freight Services UAE: Zero Rate vs 5% Explained

VAT on freight services in the UAE is 0% when the service is international transport of goods that starts or ends in the UAE, or passes through it. Local charges that fall outside that rule normally carry the standard 5% VAT. The hard part is deciding, job by job, which charge sits on which side of the line.

This guide is for UAE forwarders and logistics companies. It is general information, not tax advice. Check your own facts with the Federal Tax Authority (FTA) or a registered tax agent.

What is the rule for VAT on freight services in the UAE?

The zero rate comes from Article 45(2) of Federal Decree-Law No. 8 of 2017. It covers "services of international transport of passengers and goods, which starts or ends in the State or passes through its territories, including services related to such transport."

The Executive Regulation adds the detail. Article 33 deals with zero-rating international transportation services. Article 35 covers goods and services supplied in connection with means of transport. Read the current consolidated text, because Article 33 was amended in 2025.

Three points from the FTA's guidance on zero-rated and exempt supplies matter for your invoices:

• You do not charge tax on a zero-rated supply.
• It is still a taxable supply at 0%. You record it in your VAT account and report it on the return.
• You can recover input tax on business purchases, subject to the normal conditions.

When is freight zero-rated and when does 5% apply?

Zero-rating depends on the service you sell, not the shipment alone. Here is a working summary.

Treat the table as a starting point. Ancillary charges are where sources disagree, so look at the facts of each job.

Does the same supplier rule change how you invoice trucking legs?

Yes. Under the 2025 amendments, the domestic part of an international transport service is zero-rated only if the same supplier provides the international leg. This is how the FTA's Public Clarification VATP040 (March 2025) is reported by PwC. I could not find the clarification itself on tax.gov.ae, so we are relying on professional summaries here.

Here is a hypothetical example. Say a Dubai forwarder agrees to move a customer's cargo from a Sharjah warehouse to Mumbai.

• The forwarder books the sea freight from Jebel Ali.
• The forwarder also invoices the Sharjah to Jebel Ali truck on the same job.
• Both legs are in one contract with one supplier.

That is the pattern the rule is built for. Now flip it. The customer books the Sharjah truck with a local haulier and gives you only the Jebel Ali to Mumbai leg. The haulier's local charge is a separate supply, and 5% likely applies to it.

The middle case is subcontracting. PwC and KPMG read it differently. KPMG reports that zero-rating is not lost if you subcontract part of the transport but stay contractually liable to the customer for both the domestic and international parts. PwC's summary is stricter about a different supplier for the domestic leg. So the answer may turn on who contracts with the customer and who carries liability. Get a written view from the FTA or an adviser before you rely on either reading.

KPMG and Alvarez & Marsal also report a second limit. Services provided during the transport to someone other than the recipient of the transport service do not qualify for zero-rating. If you sell something to a third party on the same job, do not assume it rides along at 0%.

What about freight that starts outside the UAE?

This is the grey area, so read the sources carefully. Article 45(2) says "starts or ends in the State or passes through its territories". Alvarez & Marsal and Easmea both say a transport supply that begins outside the UAE is outside the scope of UAE VAT, not zero-rated. A&M notes that many logistics businesses had reported such supplies as zero-rated.

In both readings, the freight charge itself does not get 5% added. The difference is in how you classify and report it. That can matter for your return, so ask your adviser how to report import-leg freight and keep that answer on file.

Which local charges carry 5% VAT?

Local charges carry 5% when no zero-rate or exemption rule covers them. In practice, check these lines on every quote:

• Trucking inside the UAE that is not part of an international service you provide.
• Storage or handling billed on its own to a local customer.
• Documentation or admin fees that are not related to the international transport.
• Services sold to a third party, not to the recipient of the transport service.

"Services related to such transport" is in the law, so some ancillary charges can follow the freight at 0%. Whether a charge qualifies depends on the facts. Do not apply one rule to every line.

Also check where the service happens. The FTA's Designated Zones guide says only free zones listed in a Cabinet Decision are Designated Zones for VAT. A free zone that is not listed is treated like any other part of the UAE. Being at Jebel Ali or KEZAD is not enough on its own. Look up your zone on the list under the Legislation tab on tax.gov.ae.

How do you check VAT on a freight job before you invoice?

Run the same five steps on every job. It takes a few minutes and avoids credit notes later.

1. Write down the route. Where does the cargo start, where does it end, and does it pass through the UAE?
2. List every charge. Freight, pickup, delivery, handling, storage, documents, anything else.
3. Mark who supplies each leg. Your company, a subcontractor under your contract, or a supplier the customer booked directly.
4. Mark who receives each service. Is it the customer receiving the transport, or someone else?
5. Set the VAT code per line and keep the evidence. Zero-rated lines still go on your return. Keep the contract, transport documents and invoices that show the route and the supplier.

What mistakes do forwarders make with freight VAT?

• Zero-rating every line because the job is "international".
• Treating a local haulier's separate invoice as part of your zero-rated service.
• Applying the zero rate to a free zone service without checking the Designated Zones list.
• Leaving zero-rated sales off the return because no tax was charged.
• Using an old reading of Article 33 after the 2025 amendments.
• Mixing zero-rated and 5% items on one invoice line, so nobody can see the split.

Most of these start in spreadsheets. The quote says one thing, the invoice another, and the VAT code gets set by whoever is in a hurry. Quickship's Freight Management module covers a job from inquiry to invoice, so the charge lines for a job stay together. It is software only. Quickship does not move cargo and does not give tax advice, so your tax treatment still comes from the FTA or your adviser.