VAT Impact on Logistics Industry in UAE

UAE is well known for being one of the very few countries which are tax free but now UAE and other GCC countries are following the path of those countries who have implemented VAT in their frameworks, UAE will be implementing VAT from 1st January 2018 at a very low rate of 5% which is standard rate as well, VAT will be affecting every step involved in the supply chain.

Logistic is a part of supply chain which starts from the origin and works till the point of consumption in order to satisfy and fulfill the need of the end consumer as it plans, implements, controls as well as helps in performing work effectively and efficiently.

Supply chain is a defined system which helps products and services to move from producer till the end consumer as it involves all the activities (transformation of natural resources, raw materials, and components into a finished product and delivery to the end customer).

Businesses don’t have to pay VAT at the point of import as businesses importing goods into the UAE will be eligible for reverse charge where if businesses are importing goods in other GCC countries which are transshipped through UAE, in that case VAT will be implemented at the first point of entry into the GCC Customs Union. Where export is categorized under zero-rated, storage will also attract VAT as businesses should plan their cash flows accordingly and should also take care of input VAT credit for the same.

Transportation of goods and people and all other related services are also chargeable but will be charged according to the place where transportation begins.