Technical evaluation of transaction relating various recoveries in logistics sector
Sector: Logistics & E-Commerce Aggregator
Facts & Analysis:
A Dubai based UAE incorporated Company involved in one of the leading e-commerce digital portal for shipping line operators. The Aggregator was specifically involved and specialize in connecting multiple stakeholders of the industry such as Carriers, Yards, Port Terminals, Custom Brokers, Forwarders, Shippers, Consignees and Banks etc. for allowing them to interact digitally and seamlessly in their export import processes / purposes.
In simpler words, the Company acts as a aggregator between the Shipping Liners and customers for ensuring seamless transmission of information and data.
The Company receives payment from customers on behalf of Shipping Liners magnitude of which is quite substantial. Company being a prudent and responsible corporate citizen wanted a detailed opinion and structuring of transaction on applicability of relevant taxable provisions on said recoveries from UAE VAT perspective.
Our major role in the entire project was to provide our professional / technical views with respect to said transaction within stipulated timeframe since the number of similar transactions undertaken by the Company being done on daily basis was quite high and amount involved was also substantial.
We had also referred various information available in public domain of Federal Tax Authority in UAE (‘FTA’) in the form of VAT Law, Regulations, Public Clarifications, Circulars, Guides etc. along with Laws and Regulations of other GCC countries and global jurisprudence. It helped us in forming our opinion with thorough technical research on subject matter.
It was in essence and substance established basis the detailed review and understanding of the transaction that the Company is acting merely as a facilitator in the said transaction and various other conditions to qualify the said transaction as Disbursement as against the reimbursement and the VAT treatment was suitably suggested.
We also drew reference to Public Clarification issued by the FTA with respect to “Disbursements and Reimbursements” wherein it is clarified that if the concerned person is receiving any amount from the customer on behalf of third party in the capacity of agent, same is to be treated as Disbursement. Further there are few principles mentioned in said clarification which helped in determining whether the said transaction falls under the preview of “Disbursement” or “Reimbursement”. The Company was extremely happy with our detailed opinion along with comprehensive clarity with regard to documentation to be carried out to ensure that the transaction in form and substance be treated in alignment with the clarifications and guidance notes issued by FTA in UAE.