Assets worth more than the company
Voyages that straddle year ends, vessels depreciated by component, drydocking that arrives in lumps, and a VAT treatment operators routinely over-apply.
The UAE is one of the world's principal maritime hubs, and shipping accounting carries a set of problems almost no other sector shares: assets worth more than the company, revenue earned across voyages that straddle year ends, and costs denominated in a currency nobody chose.
Revenue, by contract type
| Arrangement | How revenue arises | Accounting focus |
|---|---|---|
| Time charter | Hire paid per day for the use of the vessel and crew | Recognised over the charter period; often contains a lease component |
| Bareboat charter | Vessel hired without crew | Very likely a lease — assess under IFRS 16 |
| Voyage charter | Paid to carry a cargo between ports | Recognised over the voyage; requires load-to-discharge measurement |
| Agency and freight forwarding | Arranging carriage for others | Principal versus agent — decides gross or net revenue |
Voyages that straddle a reporting date are the recurring cut-off problem: revenue and voyage costs need apportioning across the period on a consistent basis, and a business that recognises a voyage entirely on completion will report lumpy, misleading periods.
Vessels and the costs that follow them
- Componentisation — a vessel is not one asset. Hull, engines and other major components with different useful lives are depreciated separately, over their own lives and to their own residual values.
- Drydocking and special survey — capitalised as a separate component and depreciated to the next scheduled survey, rather than expensed as a lump in the year it occurs.
- Residual value — for a vessel, scrap steel value is material and directly affects the depreciation charge, so it should be estimated properly rather than assumed to be nil.
- Impairment — vessel values move with a cyclical market, and indicators of impairment need genuine assessment rather than annual assertion.
- Bunkers — fuel is inventory, valued and counted, and often one of the largest single cost lines.
- Crew costs — including rotation, repatriation and the accruals that accompany them.
Qualifying international transport of passengers and goods, and certain supplies of and to vessels used in it, are treated favourably under UAE VAT — but the conditions are specific and depend on the nature of the vessel, the voyage and the supply. Operators frequently apply a blanket assumption across all their supplies, including domestic movements and non-qualifying services, where the treatment does not in fact extend. It is worth mapping supply by supply once.
Reviewed 18 August 2026 by Ahmed Nabil Selim. UAE tax rates, thresholds and deadlines change — confirm the position for your period before relying on it.
Marine & shipping — frequently asked questions
By contract type. Time charter hire is recognised over the charter period as the vessel is made available, and a time or bareboat charter frequently contains a lease under IFRS 16, which needs assessing rather than assuming. Voyage charter revenue is recognised over the voyage as the service is performed, which requires a consistent basis for measuring progress and for apportioning voyages that straddle a reporting date. Recognising a voyage entirely on completion produces lumpy and misleading periods.
As a separate component of the vessel, capitalised when incurred and depreciated over the period to the next scheduled drydocking or special survey. That matches the cost against the periods that benefit from it, rather than dropping a large charge into a single year and distorting both that year and the ones on either side. Routine maintenance and repairs that do not extend the vessel's service potential remain expensed as incurred.
Qualifying international transport of passengers and goods, and certain related supplies including supplies of and to vessels used in such transport, receive favourable treatment under the UAE VAT legislation. The conditions are specific and depend on the nature of the vessel, the voyage and the particular supply — and they do not extend automatically to domestic movements, to all vessel-related services, or to everything an operator sells. A blanket assumption across the whole business is one of the more common and more expensive errors in the sector.
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