Different VAT rates for courier and freight services

What VAT rate will apply on our different courier and freight services? For example, we are moving shipments domestically, besides exporting and importing documents and parcels. We pay customs duties on behalf of our customers. I would like to know whether five or zero per cent will be applicable on each service? Muzammil

The domestic transportation of goods in the UAE is subject to VAT at five per cent, says tax expert Shiraz Khan, head of Al Tamimi & Company’s Middle East tax practice. The exporting of documents and parcels is categorised in the same way as the exporting of any goods to outside the GCC countries that have implemented VAT — they are subject to VAT at zero rate.

If goods are imported by a taxable person from outside the GCC and the goods are then moved to another GCC member state, VAT will be payable at the first point of import. This VAT will be recoverable only in the destination country, according to Deloitte.

For the import of documents and parcels, Khan says assuming that the questioner’s company is registered for VAT, it will need to account for VAT under the reverse charge mechanism. Therefore, the company will need to charge VAT on the value of the imported goods at 5 per cent, but it should be able to claim a deduction for the same as input VAT is subject to the normal rules of VAT recovery.

Lastly, for customs duties, VAT will apply at 5 per cent on the value of imported goods inclusive of customs duties, Khan adds. More : Gulf News