VAT on Delivery Charges and Cash on Delivery in the UAE: What Online Sellers Charge, Claim and Report

Yes. If you are registered for VAT in the UAE and you charge a UAE customer for delivery, that charge is taxed at the standard 5% rate, as of October 2026. It does not matter whether you build delivery into the product price or show it as a separate line. Cash on delivery (COD) changes how the money reaches you, not the tax: VAT is due on the full amount the customer pays, including any COD fee you add. The 5% your courier charges you on its delivery and COD fees is input tax you can normally recover.

This page is general information about the UAE VAT rules, not tax advice for your business. Confirm your own case with the Federal Tax Authority (FTA) or a registered tax agent.

Is delivery taxed when it is bundled into the price?

When you sell a product and deliver it for one price, the UAE Executive Regulation asks whether this is a "single composite supply". A composite supply has a principal part (the goods) and parts that are incidental to it or only a means of better enjoying it, such as getting the goods to the customer. A single composite supply takes the VAT treatment of its principal component.

So "free delivery" on a standard-rated product is simple: the delivery is part of the goods supply, and the 5% on your product price already covers it. There is no separate VAT line to calculate.

Is delivery taxed when you show it as a separate charge?

The same Article 4 of the Executive Regulation, as amended by Cabinet Decision No. 100 of 2024, says a composite supply only exists when the price of each component is not separately identified or charged, and all components come from one supplier. If your checkout shows "Delivery: AED 15", the delivery is therefore its own supply of a transport service.

That service is still taxed at 5% when the delivery is inside the UAE. Here is why, from the Decree-Law itself:

• The standard rate is 5% on every taxable supply unless the law zero-rates or exempts it.
• The zero rate covers international transport of goods that starts or ends in the UAE, not delivery from one UAE address to another.
• The only transport exemption is local passenger transport. Moving goods is not on the exempt list.

The practical result is the same either way: domestic delivery you charge for carries 5%. Showing it separately only changes how you present it on the tax invoice.

How each delivery and COD charge is treated

The rows for your own charges follow from the rules above. The courier rows follow because a UAE courier's service to you is a taxable supply at 5% under the same Decree-Law. International delivery is zero-rated under Article 33 of the Executive Regulation when the transport runs from the UAE to a place outside it. Exports carry their own evidence rules, so keep shipping and customs records for every cross-border order.

Can you pass the courier's cost on without VAT?

Usually not. Many sellers think that if they "just pass on" the courier's bill at cost, it falls outside VAT. The FTA separates two cases:

1. Reimbursement. You bought the courier service yourself, as principal, and recover the cost from the customer. This is part of the consideration for your supply and follows its VAT treatment, so 5% applies.
2. Disbursement. You paid on someone else's behalf. It is outside VAT only if all the conditions hold: the customer is the recipient of the courier service, the customer is responsible for paying the courier, the courier's invoice is in the customer's name, the customer authorised you to pay, and you recover the exact amount with no mark-up, shown separately.

In normal online selling, you book the courier, the courier invoices your company, and the customer never deals with the courier. That is a reimbursement. Charge 5% on the delivery fee.

How does VAT work on a cash-on-delivery order?

COD is a payment method, not a different kind of supply. The FTA's guidance on e-commerce reporting says the form of payment, including cash on delivery, does not change whether a sale counts as an e-commerce supply. Three things follow for you.

VAT is on the gross amount. The value of a supply is the consideration the customer pays, less the VAT. The courier collects AED 219 at the door and later sends you AED 219 minus its fees. Your output VAT is worked out on AED 219, not on the net remittance. The courier's fees are a separate cost with their own VAT.

The date of supply is the earliest trigger. VAT is due at the date of supply, which is the earliest of, among others, the date the goods are transferred under your supervision, the date you receive payment, or the date you issue the tax invoice. If your system prints the tax invoice when the parcel leaves the warehouse, that print date is the date of supply, even though the cash arrives days later. You must issue the tax invoice within 14 days of the date of supply.

A refused parcel needs a credit note, not a deletion. If the tax invoice was already issued and the customer refuses the parcel, the supply is cancelled. A registrant must adjust output tax when a supply is cancelled or goods are returned and the money refunded. You do that with a tax credit note that carries the words "Tax Credit Note", your TRN, the original and corrected values, the VAT difference in AED and a short reason.

If you only issue the tax invoice once the courier confirms delivery and collection, a refused parcel never reaches the invoice stage: there was no transfer, no payment and no invoice. For a store with many failed COD deliveries, invoicing on delivery means far fewer credit notes. Ask your accountant which point in your order flow your system treats as the invoice date.

What price must the customer see?

Prices published to consumers must include VAT. The exceptions let you show VAT-exclusive prices for exports and for customers who are themselves VAT-registered, and then the price must be clearly marked as excluding tax. For a consumer checkout, "Delivery AED 15" means AED 15 including VAT, so the VAT inside it is AED 15 × 5/105 = AED 0.71.

Do not advertise delivery, or anything else, as "VAT-free" to make an offer look better. The FTA says VAT-registered businesses should not advertise taxable goods or services as free of VAT, or sell them without accounting for 5%, unless the supply is zero-rated. If you choose to absorb the VAT as a promotion, you still declare 5% on the price the customer pays.

Worked example in AED: one COD order

This is illustrative. Rates come from the law above; the order values and courier fees are invented to show the arithmetic.

A Dubai seller, VAT-registered, sells a lamp on its own website. The customer pays cash on delivery. All prices shown to the customer include VAT.

In this example, the courier invoices the seller AED 12.00 plus AED 0.60 VAT for delivery, and AED 3.00 plus AED 0.15 VAT for COD handling. It deducts AED 15.75 and remits AED 203.25.

• Output VAT on the return in this example: AED 10.43.
• Input VAT the seller can normally recover: AED 0.75.
• Net VAT for this order: AED 9.68.

Now the common mistake, using the same illustrative order. A seller who treats delivery and COD fees as "pass-through" declares only AED 9.48 and under-declares AED 0.95 on this order. For example, on 2,000 similar orders a quarter, that is AED 1,900 of VAT short in one return, plus whatever penalties the FTA applies when it finds it. A seller who calculates VAT on the AED 203.25 remittance instead of the AED 219 collected makes a similar error in the other direction on input tax.

What if you sell through Amazon.ae, noon or another marketplace?

The FTA treats a marketplace acting as a disclosed agent (selling in your name) as making the sale on your behalf, so the supply of the goods, and any delivery charge to the customer that belongs to it, stays yours for VAT. The marketplace's own commission and fees are a separate supply of services to you. The same guide notes that a service of physically handling and delivering goods in the UAE cannot be zero-rated, because it is directly connected with goods in the UAE. How those fees work on Amazon.ae and noon is covered in VAT on Amazon.ae and noon fees.

A VAT-registered agent may issue the tax invoice for a supply it makes on your behalf, provided it shows your name and TRN; only one tax invoice may exist for each supply. Check in your seller account whether the platform issues invoices for you, so you do not issue a second one for the same order. Whether a given platform collects delivery fees as your agent or in its own name depends on its seller agreement; we have not verified each platform's terms, so read yours.

Does a free zone seller treat delivery differently?

Mostly not. A business established or registered in a designated zone is treated as resident in the UAE for VAT. Article 51(7) of the Executive Regulation places some shipping and delivery services outside the UAE when goods leave a designated zone and are sold through an electronic sales platform, but only where the seller is a non-resident and not VAT-registered. A UAE free-zone company is not a non-resident, so that carve-out does not cover it. The wider designated-zone rules are in VAT for free zone sellers.

Which emirate do you report delivery income under?

Your VAT return reports standard-rated supplies by emirate in Box 1. From 1 July 2023, a registrant whose taxable e-commerce supplies exceed AED 100 million in a calendar year reports them by the emirate where the customer receives the goods, which is the delivery address the customer gives. Below that level, the general rule applies: report in the emirate of the establishment most closely linked to the supply. The delivery and COD fees go in the same box as the goods they belong to. Filing steps are in VAT return filing for online sellers.

FAQ

Do I charge VAT on delivery if I am not VAT-registered? No. Only a taxable person, meaning someone registered or required to register, charges VAT. Your delivery fees do count towards your taxable turnover, so include them when you check the AED 375,000 mandatory registration threshold. See UAE VAT registration for sellers for the thresholds.

Is the COD fee I pay my courier subject to VAT? Yes, when a VAT-registered UAE courier charges it. It is a standard-rated service to you at 5%. Keep the courier's tax invoice in your company's name with its TRN, because that invoice is what supports your input tax claim on the VAT return.

Can I call delivery a "disbursement" and leave VAT off it? Only if every disbursement condition is met, including the courier invoicing your customer directly and you passing on the exact cost with no mark-up. In normal online selling the courier invoices you, so the recharge is a reimbursement and carries 5%.

What happens to VAT on a COD order that is never paid? If you never issued a tax invoice, never received payment and the goods came back, the date of supply has not been triggered. If you had already issued the invoice, issue a tax credit note to reverse the output VAT in the period the cancellation happens.

Is delivery to Saudi Arabia or Oman zero-rated? International transport of goods that starts in the UAE and ends outside it can be zero-rated, and so can the export of the goods, if you keep the export evidence the rules require. Check the current FTA guidance on exports and the destination country's import VAT before you price these orders.

Does free delivery reduce the VAT I owe? No. Free delivery means the delivery is part of the goods supply, and VAT is 5% of what the customer actually pays. You can still recover the input VAT your courier charges you, so absorbing delivery costs you the net courier fee, not the VAT on it.

Do I need to change anything when e-invoicing starts? The VAT treatment of delivery and COD does not change, but how you issue invoices and credit notes will. Read UAE e-invoicing for online sellers for the published phases and dates.

What to do next

Check three things in your order system this week: that delivery and COD fees are inside the VAT calculation, which event sets your tax invoice date, and that refused COD orders produce a tax credit note. If you sell on noon or Amazon.ae and want the account side run while your accountant owns the VAT, see our noon account management service.