How to account for freight, customs duty and import VAT in the UAE as a logistics business

A typical import job invoice might show ocean freight, destination handling, customs clearance, delivery, and customs duty paid. Some of these are your services, some are services you buy and resell as principal, and some are amounts you paid as the client’s agent. The distinction drives the accounting.

• Own services: clearance, documentation, handling, your trucking.
• Bought-in services resold as principal: carrier freight you contract for and mark up.
• Disbursements paid as agent: customs duty and similar amounts paid in the client’s name.

When you pay customs duty in your client’s name and recharge the exact amount, you are acting as agent. Record the payment as a receivable from the client, not as a cost, and the recharge as clearing that receivable, not as revenue. Treated this way, disbursements stay out of your VAT on sales because they are not your supply, provided the conditions for a disbursement are met.

Worked example: you pay AED 6,400 of customs duty for a client’s shipment and recharge AED 6,400. Revenue: nil. Receivable: AED 6,400 until the client pays. If you instead mark it up to AED 6,700, ask your tax agent whether it still qualifies as a disbursement, because adding a margin usually changes the treatment.

The Ministry of Finance lists international transportation and related supplies among zero-rated supplies. Freight that moves goods into or out of the UAE, and some services closely related to it, can therefore be zero-rated. Domestic legs, warehousing and local delivery that are not part of an international movement are usually standard-rated at 5%.

The line between related and unrelated services is where errors happen. Map each service code to a VAT treatment once, with your tax agent, and keep evidence of the international movement, such as bills of lading or airway bills, on each job.

When your client is VAT registered, the import VAT on its goods is normally accounted for by the client through its own VAT return, under the reverse charge, rather than paid at the border. Where a forwarder pays import VAT on a client’s behalf, for example for an unregistered importer, it is another agent payment to recover from the client, recorded the same way as duty.

Keep the customs declaration with each job. Clients will ask for it to support their own VAT return, and your auditor will want it to support disbursement balances.

Each shipment should carry a job number, and every revenue line and every carrier or supplier bill should be tagged to it. Job profit is your own fees plus resold freight, minus carrier and subcontractor costs, ignoring disbursements entirely.

Worked example: a job shows freight sold at AED 9,800 against AED 8,200 from the carrier, clearance fees of AED 650 and trucking of AED 900 against AED 600 subcontracted. Job profit is AED 2,550. The AED 6,400 of duty on the same invoice makes the invoice look bigger but adds nothing to profit.

These distort both VAT returns and management accounts.

• Recording duty recharges as sales, inflating revenue and VAT-able turnover.
• Zero-rating local warehousing because the goods once arrived by sea.
• Carrier bills posted to overheads instead of to the job.
• Unbilled disbursements sitting in receivables for months.

HelloBooks tags revenue and costs to jobs using classes or projects, keeps a disbursements receivable account per client, and applies per-line VAT treatment: zero-rated, standard or out-of-scope. The AI agent reads carrier bills, posts them to the right job and asks “which jobs this month have carrier bills but no sales invoice?” to catch unbilled work.

VAT treatment of each service is your decision with your tax agent. For a job profitability report or invoice layout separating disbursements, request a customization at /book-a-demo.