VAT for Logistics Companies in the UAE: Freight, Customs Clearance and Warehousing (2026)

For a logistics company, the VAT rate on an invoice line can be 0% or 5% depending on where the goods started, where they are going and whether your service is part of that journey. A truck trip from Jebel Ali to Abu Dhabi is 5%. The same trip, if it is the first leg of a shipment to Oman, can be 0%. Storage, customs clearance and duties paid for clients each have their own rules again, and freight forwarders juggle all of them on every job.

This guide is for freight forwarders, shipping and airfreight agents, road hauliers, couriers, warehouse operators and customs brokers. It covers when transport is zero-rated, how related services are treated, the disbursement rules that decide whether pass-through costs carry VAT, designated zones, and how corporate tax applies to logistics businesses, including the free zone rules that specifically cover logistics services.

Quick answer: international transport of goods and passengers, including the UAE leg of an international journey, is zero-rated. Services directly connected to that transport, such as loading, handling and customs clearance, can also be zero-rated. Domestic transport and standalone warehousing carry 5%. Costs you pay on a client's behalf are outside VAT only if they meet all the disbursement conditions. Logistics services are a qualifying activity for the free zone 0% corporate tax rate.

International transport: zero-rated

The following are zero-rated:

• transport of goods from the UAE to a place outside the UAE, or from outside into the UAE

• transport of goods or passengers that starts and ends outside the UAE but passes through it

• a domestic leg that forms part of an international journey, for example trucking from a factory in Dubai to the port for export

• international passenger transport, including flights out of the UAE

The key is evidence that the movement is part of an international journey: the bill of lading or airway bill, the customs declaration, booking confirmations and the contract with the client. A subcontracted haulier carrying the first leg of an export can also zero-rate its service, but only if it can show that the leg is part of the international movement. Without that, it must charge 5%.

Example: A forwarder arranges an export from a Sharjah factory to Germany. It charges AED 3,000 for trucking to Jebel Ali Port, AED 9,000 for ocean freight and AED 1,200 for export clearance. All three are part of the international transport, so all three can be zero-rated. The forwarder's input VAT on its UAE costs is still recoverable.

Related services

Services directly connected with international transport can follow the same zero rate. These include:

• loading, unloading, handling and packing for shipment

• customs clearance and brokerage connected with the import or export

• temporary storage that forms part of the international movement

• port charges, terminal handling and airport fees

• transport insurance for an international shipment

• demurrage and detention charges, which follow the treatment of the main transport

Long-term or standalone storage is different. Goods held in a UAE warehouse for weeks or months as part of a client's inventory, with no specific onward international movement arranged, is a warehousing service at 5%.

What carries 5%

Services provided to a non-resident client who isn't in the UAE can sometimes be zero-rated as an export of services even when they aren't transport, but goods-related services, such as storing or handling goods located in the UAE, usually can't. Check each contract with foreign clients separately.

Disbursements: when pass-through costs carry no VAT

Forwarders and customs brokers often pay duties, port fees and third-party charges for clients and recharge them. Whether those recharges carry VAT depends on whether they are disbursements or reimbursements.

A cost is a disbursement, outside the scope of VAT on your invoice, only if all of these apply:

1. you paid it as the client's agent,

2. the client received the goods or services, not you,

3. the client was responsible for paying the cost,

4. you had the client's permission to pay it,

5. the client knew the goods or services came from a third party,

6. the cost is shown separately on your invoice, and

7. you recharge the exact amount, with no mark-up.

If any condition fails, the cost is a reimbursement: it becomes part of your own supply and takes its VAT treatment, so 0% if it is part of international transport, or 5% if it is part of a domestic service.

Customs duty and import VAT paid on a client's behalf are the classic disbursement: you pay them as agent, the client is the importer, and you recharge at cost. Import VAT paid this way belongs to the client, who recovers it, not to you.

Example: A customs broker clears an import for a client, paying AED 5,000 of customs duty and AED 5,250 of import VAT under the client's importer code, and charges a clearance fee of AED 400. The AED 10,250 is a disbursement with no VAT. The AED 400 fee carries 5% (AED 20) unless it is part of an international transport supply the broker makes.

Designated zones

Many logistics operations sit in designated zones such as Jebel Ali Free Zone. Goods moving within or between designated zones, or brought from abroad into a designated zone, can be outside the scope of VAT if they are held under customs control and not consumed. Services provided within a designated zone, including warehousing and handling, are taxed under the normal rules: 5% unless they are part of international transport or another relief applies.

Goods released from a designated zone to the mainland are treated as imported at that point, with import VAT due. Warehouse operators should make sure releases are matched to customs documents, because a release without documentation can leave the operator with a customs and VAT liability.

Input VAT and the 2026 rules

Because zero-rated transport is taxable, logistics companies can recover input VAT on fuel, vehicle maintenance, warehouse rent, equipment and subcontractors. The usual blocked categories still apply, in particular cars available for staff's personal use.

Two 2026 changes need attention:

• Cash payments to drivers and subcontractors. From 1 October 2026, input VAT can be blocked on supplies above the pending threshold paid in cash. Owner-drivers and small haulage subcontractors paid in cash are the obvious risk. See our guide to the cash payment rules.

• Supplier verification. Shipping lines, airlines, hauliers and warehouse landlords are often paid more than AED 100,000 a year, which means full verification applies before you claim input VAT. Read our supplier verification guide.

Companies that are mostly zero-rated tend to build up VAT credits. Credits from 2018 to 2021 must be used or refunded by 31 December 2026 or they are lost. See how to claim them.

Invoicing and e-invoicing

A forwarder's invoice often mixes zero-rated freight, 5% local charges and disbursements. Each line needs the correct VAT treatment, and disbursements must be shown separately. Under the UAE's e-invoicing mandate, B2B logistics invoices must be issued as structured e-invoices from 1 January 2027 for businesses with revenue of AED 50 million or more, and from 1 July 2027 for everyone else. Mixed-rate invoices are exactly where poor master data causes rejections, so clean up your charge codes early. Our e-invoicing guide has the timeline and steps.

Corporate tax for logistics companies

Free zone logistics companies

Logistics is one of the few service activities that qualify for the 0% free zone rate. Under Ministerial Decision No. 229 of 2025, "logistics services" are a qualifying activity for a Qualifying Free Zone Person. This covers transporting and storing goods for others without taking ownership of them. Ownership, management and operation of ships also qualifies, except for ships used for local transport, leisure or as floating hotels or restaurants.

To keep the 0% rate, the company must still meet every other condition, including having adequate substance in the free zone, preparing audited financial statements and keeping non-qualifying revenue within the de minimis limit (the lower of 5% of revenue or AED 5,000,000). Services to individuals, such as household moving or personal parcel delivery, are transactions with natural persons and are non-qualifying. Our guide on free zone versus mainland corporate tax explains the test.

Mainland logistics companies

Mainland logistics companies pay 9% on taxable profit above AED 375,000. Fleet-heavy businesses should plan for depreciation of vehicles and equipment and check the interest limitation rules on vehicle finance: net interest is deductible up to 30% of tax-adjusted EBITDA, with a safe harbour for the first AED 12,000,000.

Related-party arrangements

Logistics groups often have a free zone entity and a mainland entity serving the same customers. Charges between them, such as subcontracted haulage, warehouse space and management fees, must be at arm's length and, above the thresholds, disclosed with the corporate tax return.

Logistics VAT checklist

• Keep evidence that each zero-rated leg is part of an international movement

• Separate standalone warehousing (5%) from storage linked to a shipment

• Test every recharge against the disbursement conditions

• Pay duties and import VAT under the client's importer code where you act as agent

• Match designated zone releases to customs documents

• Stop paying drivers and subcontractors in cash, and verify major suppliers

• Claim old VAT credits before 31 December 2026

• Clean up charge codes for e-invoicing

Frequently asked questions

Is freight forwarding subject to VAT in the UAE?

International freight forwarding is zero-rated when it is part of the transport of goods into, out of or through the UAE. Domestic forwarding carries 5%.

Is VAT charged on trucking within the UAE?

Yes, at 5%, unless the trip is a leg of an international movement and you can prove it.

Do customs brokers charge VAT on duties paid for clients?

Not if the duties meet the disbursement conditions. The broker's own fee usually carries VAT unless it is part of international transport.

Is warehousing in Jebel Ali Free Zone subject to VAT?

Warehousing is a service, so normal VAT rules apply even in a designated zone. It carries 5% unless it is part of international transport.

Do free zone logistics companies pay 0% corporate tax?

Logistics services are a qualifying activity, so they can benefit from 0% if all the Qualifying Free Zone Person conditions are met. Services to individuals are non-qualifying.

Keeping your logistics business compliant

Logistics VAT errors usually come from charge codes set up years ago and applied automatically to every job. A review of your tariff codes, disbursement handling and subcontractor files fixes the problem across thousands of invoices at once. Our VAT and corporate tax team works with forwarders, hauliers and warehouse operators on VAT returns, refund claims and corporate tax filing. Book a free consultation to get started.

More sector guides: VAT for trading companies, VAT for e-commerce, VAT for construction.

This article is general information based on UAE VAT and corporate tax legislation as of October 2026, including Federal Decree-Law No. 8 of 2017 as amended, its Executive Regulation and Ministerial Decision No. 229 of 2025. It is not tax advice. Check your specific position with the Federal Tax Authority or a qualified adviser.