The UAE VAT Law provides a 0% VAT rate for the international transport of goods under certain conditions.

However, many businesses get confused when a shipment includes a domestic leg (for example, transport from Dubai to Abu Dhabi before being exported overseas).

Under Article 33(1)(d) of Cabinet Decision No. 52 of 2017 (Executive Regulations),

“The transport of goods shall be zero-rated if it is an international transportation, including any domestic leg that is part of the international journey, provided it is supplied by the same supplier under one contract.”

In simple terms:

👉 The domestic leg (within UAE) can also be zero-rated — but only if the same supplier handles both the local and international parts of the shipment under one contract.

If there are separate suppliers or contracts, the domestic leg becomes taxable at 5%.

A logistics company arranges transportation:

Truck from Dubai to Abu Dhabi Port, and

Ship from Abu Dhabi Port to Mumbai

If both parts are handled by the same supplier under a single contract,

then the entire route — Dubai → Abu Dhabi → Mumbai — qualifies for 0% VAT.

✅ Why? Because it’s a continuous international journey with one responsible supplier.

Suppose:

One supplier transports goods from Dubai to Abu Dhabi (domestic leg), and

Another supplier ships goods from Abu Dhabi to Mumbai (international leg).

Here:

The Dubai → Abu Dhabi leg is a separate local service, so 5% VAT applies.

The Abu Dhabi → Mumbai leg qualifies for 0% VAT as it’s international.

⚠️ Result: Split contracts mean split VAT treatment.

The FTA’s VAT Public Clarification VATP013 and subsequent guidance reaffirm this position:

The key test is whether the supplier is contractually responsible for the entire transport (including domestic and international legs).

Subcontracting the domestic portion does not disqualify zero-rating, as long as the main supplier remains responsible under one contract.

✅ Same supplier + one contract = 0% VAT on the entire transport.

❌ Separate agreements or suppliers = 5% VAT on the domestic leg.

📄 Always keep proof of export — such as the bill of lading, customs exit certificate, and signed transport contract.

🔍 Review logistics contracts carefully before issuing tax invoices to avoid incorrect VAT application.

1. If I subcontract the domestic leg to another transporter, does it stay 0%?
Yes — as long as you remain contractually liable for the entire shipment from UAE to the foreign destination.

2. What if I issue two separate invoices — one for the UAE leg and one for export?
Then the UAE leg becomes 5% VAT taxable because it’s treated as a separate domestic supply.

3. What documents must I retain?

· Transport contract covering the entire journey

· Customs export declaration or exit certificate

· Bill of lading or airway bill proving goods left the UAE

· Any correspondence linking both legs under one shipment