International Transport — Zero-Rated

International Transport

International transport of goods and passengers is zero-rated (0%). The supplier charges no VAT but can recover input tax on related costs.

What Qualifies as International Transport?

• Transport from the UAE to outside the GCC implementing states
• Transport from outside the GCC to the UAE
• Transport through the UAE (transit)
• Transport between two points outside the GCC, arranged by a UAE business

Zero-Rated Transport Services

• Passenger transport: International flights, international sea crossings, international bus/coach services
• Freight transport: International shipping, international air freight, international road haulage
• Related services: Freight forwarding, customs clearance, container handling, warehousing for transit goods

Supply of Transport Means

The supply, rental, repair, and maintenance of qualifying transport means is zero-rated:

• Vessels used for commercial transport of goods or passengers
• Aircraft used for commercial transport
• Vehicles used for commercial transport of 10+ passengers

Conditions for Zero-Rating

1. The transport must be international (crossing GCC borders).
2. The supplier must maintain documentation proving the international nature (tickets, bills of lading, manifests).
3. Related services must be directly connected to international transport.

Domestic Transport (Contrast)

Domestic transport is treated differently:

• Domestic passenger transport: Exempt (e.g., local taxis, local buses).
• Domestic goods transport: Standard-rated at 5% (e.g., local trucking).

Worked Example

A Dubai logistics company provides international freight forwarding from Jebel Ali to Rotterdam. The freight forwarding service is zero-rated (related to international transport). The company also provides domestic trucking from Dubai to Abu Dhabi — this is standard-rated at 5%. The company must carefully distinguish between international and domestic services on its VAT return.