Dubai, UAE: WTS Dhruva Consultants, is a boutique tax advisory firm and FTA registered tax agent with a presence in the UAE, KSA and Bahrain, have published a one of a kind comprehensive guide on the ‘VAT implications on the Shipping and Logistics Sector’ for those companies engaged in the logistics business. This is their second publication, the first being the VAT publication on the Healthcare sector in the UAE.

Over the past two years, WTS Dhruva Consultants have been working closely with large conglomerates across the GCC region and have assisted in VAT implementation, VAT compliance automation support, VAT structuring, litigation support and more.

The firm is positive that as VAT regulations are evolving across the region, it is imperative for businesses to align the business processes with the tax position and/or procedures prescribed. It is equally important for the business to re-evaluate the tax positions taken at the time of this implementation; as the same could undergo a sea change considering the regular publication of VAT guides and clarifications issued by the relevant Tax authorities. The re-evaluation may have an impact on the previously submitted VAT returns and the exposure to the penalty may persevere.

This VAT guide is prepared by WTS Dhruva’s team of VAT experts, who have hands-on experience within the shipping and logistics industry. The guide has covered a wide range of topics across various service lines and will be a relevant tool to a wide cross-section of organisations within the sector, as it highlights the VAT implications on transportation, supply/leasing of vessels, warehouses, and courier agencies’ activities.

Dinesh Kanabar, CEO and Founder of WTS Dhruva Consultants, is a tax stalwart and industry leader whose view is that “A majority of tax jurisdictions apply for exemptions and/or zero-ratings to the inbound and outbound transportation of goods, whereas the transportation of goods locally attracts taxes. In the UAE, inbound and outbound transportation is zero-rated, while the transport of goods locally is subject to VAT at 5%.”

The guide has deliberated on whether local transportation can be treated as zero-rated if the same is linked to the international movement. It also addresses the VAT treatment on different reimbursable expenses incurred at the port by the shipping lines, freight forwarders, agents, etc.

“It is a very important VAT guide for the shipping and logistics sector within the UAE. It has touched upon all the important VAT treatments such as the movement of goods, different charges levied by the vessel operator, shipping lines/ container operator, freight forwarders, agents, etc.,” said Pratik Shah, Partner at WTS Dhruva Consultants.

The other important issues discussed in the guide are the VAT treatment on vessel sharing arrangement agreed between the vessel operators; and VAT treatment on administrative, penal charges etc. levied by a freight forwarder to the customers.

Sunny Kachalia, Principal at WTS Dhruva Consultants, said, Pratik and Sunny further added: “It is worthwhile to understand and evaluate whether companies can apply a blanket zero-rating for inbound or outbound transportation or are there any exceptions to the rule. Inevitably, while there will be exceptions, some of the charges typically applied by logistics companies could continue to be taxable at 5%.”