VAT on Courier Services in the UAE | According To FTA Rules

A courier invoice now carries more than a tracking number. It also carries tax risk. VAT on Courier Services in the UAE is at the standard 5 per cent rate for most local movements, with narrow zero-rated cases linked to international transport and designated zones. 

Getting the split wrong can create undercharged tax, blocked input VAT and penalties. This guide walks through the main tests so courier operators, e-commerce sellers and users of bulk delivery accounts can align contracts, invoices and records smoothly.

How VAT Treats Courier Services in the UAE?

Courier activity is treated as a supply of services. Under UAE rules, most taxable supplies of services are charged at 5 per cent VAT. The same rule applies when a courier collects a parcel in Dubai, moves it to another emirate or delivers to a customer. The fee is a taxable supply at the standard rate.

The rate can change when the movement forms part of the international transport of goods. UAE VAT Executive Regulations allow zero rating for international transportation of goods and related services if clear conditions are met.

Domestic Courier Deliveries and the Five Per Cent Rate

For most courier runs inside the UAE, VAT is simple. A domestic trip, such as Abu Dhabi to Sharjah, is normally taxed at 5 per cent. The same 5 per cent rate usually applies when a courier only handles a local leg that links two points inside the country, even if the goods later move abroad with another supplier.

Many small operators ask if VAT on courier services UAE ever drops to zero for local trips. In practice, it rarely does. If the contract covers only pickup and local drop, and another company handles export, the courier should treat the fee as a standard-rated supply and charge 5 percent VAT on the invoice.

International Courier and Zero Rated Transport

International door-to-door courier products can qualify for zero rating when they meet the definition of international transport of goods. Article 33 of the Executive Regulations allows a 0 percent rate when goods move between the UAE and another country, or when the domestic leg sits inside a single international transport service.

This is where VAT on international courier services becomes more complex. Recent clarifications explain that any domestic leg can be zero-rated only when it is supplied by the same taxable person who provides the international leg.

If the main carrier subcontracts the first mile to a third party and that subcontractor invoices its client separately, the subcontracted leg generally loses zero rating and turns standard rated.

Key checks for international products:

• One supplier should remain contractually responsible for both local and international legs.
• Documents should show export of the goods, such as airway bills and customs proofs.

Courier Services in Free Zones and Designated Zones

Courier work inside free zones and designated zones can feel confusing. FTA guidance on goods supplied in designated zones states that shipping or delivery services linked to qualifying goods may fall outside the scope of UAE VAT when strict conditions are met; this includes evidence that goods leave the UAE or VAT is paid when they enter the mainland.

That does not make all VAT rules for courier services in zones zero-rated. A courier that simply moves parcels between businesses inside a free zone, without any export, is usually making a taxable supply of services at 5 percent. Each contract needs a separate review of facts, including who owns the goods at each point and where the final customer sits.

Courier Services VAT In Dubai And Registration Duties

Once courier revenue grows, registration duties start. UAE rules require VAT registration when taxable supplies and imports exceed AED 375,000 in a 12-month period; voluntary registration can start at AED 187,500.

For small riders and local aggregators, courier services VAT in Dubai often becomes an issue once e-commerce demand spikes. Typical steps:

• Track taxable turnover across all emirates, not only Dubai.
• Apply for registration through the FTA EmaraTax portal once near the threshold.
• Start issuing tax invoices with the correct TRN and 5 percent VAT line.

Failure to register on time can trigger fixed penalties plus backdated output VAT.

Practical Examples for Courier VAT Treatment

VAT on courier services UAE should always be tested against contract wording, documents and the latest FTA clarifications. Consider three quick examples for clarification:

Example 1

A courier collects parcels in Dubai and delivers them to Abu Dhabi for a local retailer. The courier charges 5 percent VAT. The retailer can usually recover that input VAT if fully taxable.

Example 2

A global express brand sells a door-to-door service where it collects in Dubai and delivers abroad under a single waybill, staying liable for the full path. If conditions are met, this can be zero rated as international transport of goods. The service provider must retain export evidence.

Example 3

That same express brand hires a small local courier to collect parcels in Dubai and bring them to its hub, with the local courier billing separately. The subcontracted leg is normally standard rated at 5 percent, even though the main service remains zero-rated.

Compliance Tips for Courier Operators and Users

To keep VAT risk low, courier firms and high-volume users can adopt a short checklist:

• Keep separate codes in the system for domestic, zero-rated international and out-of-scope zone deliveries.
• Align contracts with VAT treatment so terms match what appears on invoices.
• Archive waybills, customs proof and zone documents for at least the required record period.
• Review VAT positions when FTA issues new public clarifications on transport or designated zones.

How Arnifi Helps with VAT for Courier Services?

Courier VAT treatment touches contracts, IT and finance at the same time. Arnifi can review how VAT on Courier Services in the UAE is mapped in your rate cards and systems, test a sample of invoices against FTA rules and prepare clear notes for management and auditors. 

That support helps teams adjust now instead of facing assessments later, especially for mixed domestic and cross border flows. Hire accounting and bookkeeping services in UAE from Arnifi for stress-free and smooth VAT laws alignment for courier services.

FAQs

1. Is VAT charged on domestic courier services in the UAE?

Yes. Domestic courier trips inside the UAE are usually taxed at 5 percent. The courier charges VAT on the service fee, and the rate appears on the tax invoice shared with the customer.

2. Are international courier shipments zero rated for UAE VAT?

International courier shipments can be zero rated when one supplier controls the transport out of the UAE and keeps export proof. If legs are split between providers the local part usually attracts 5 percent VAT.

3. How does a courier decide the correct VAT rate?

A courier tests VAT treatment by reading the contract and checking the route. If the service only covers movement inside the UAE it is usually standard rated. A full door to door export can qualify for zero rate.

4. When must a courier company register for VAT in the UAE?

A small courier must register for VAT once taxable supplies plus imports pass AED 375,000 in a year. Voluntary registration starts near AED 187,500. Tracking turnover each month helps avoid late registration penalties.

5. Can a business reclaim VAT on courier invoices in the UAE?

A VAT-registered business can usually reclaim VAT on courier invoices when the service supports a taxable activity. The invoice should show the supplier’s TRN and the VAT amount. It should also show the customer’s legal name.