The Federal Tax Authority (FTA) has recently updated the basic tax information bulletin on VAT for the UAE automotive industry. According to the bulletin, the FTA has announced a 5% standard-rated VAT on motor vehicle repairs, maintenance, and services provided within the UAE.
The updated FTA Bulletin mainly targets businesses in the automotive sector, including new car dealers, used car dealers, and suppliers of parts and services.
The FTA Bulletin on VAT for the automotive business in the UAE further informs:
- VAT on repairs and services for non-resident entity
Vehicle repairs and maintenance services provided within the UAE are subject to VAT regardless of whether the consideration is charged to a non-resident entity.
- VAT on vehicles under warranty
FTA clarifies that VAT is applicable on the sale of vehicles under warranty and warranty packages, purchased separately by the customer
However, any subsequent supply of repair services and parts to the owner of the vehicle under warranty is not subject to VAT, given no additional amount is charged for repair services or parts.
- Recovery of input VAT for motor vehicles
The taxable businesses in the automotive sector are eligible for the full recovery of input VAT, except for certain blocked items such as certain entertainment services and motor vehicles (either purchased, leased, or rented) for personal use.
- VAT for public transport vehicles
The FTA bulletin asserts that supplies of qualified means of transport, such as buses which are designed or adapted for public transportation of 10 or more passengers, are zero-rated for the purpose of VAT in the UAE.
- VAT registration for UAE resident businesses
UAE resident businesses in the automotive sector who makes taxable supplies in the UAE are required to register for VAT provided, the value of their taxable supplies and imports in the last 12 months exceeded or is expected to exceed in the next 30 days, the mandatory threshold of AED 375,000.
UAE resident businesses in the automotive sector may also voluntarily register for VAT in the UAE if the value of taxable supplies, imports, or taxable expenses in the last 12 months exceeded, or is anticipated to exceed in the next 30 days, the voluntary threshold of AED 187,500.
- Tax Invoices
Tax invoices are mandatory for all standard-rated supplies, and a simplified tax invoice may be issued when the supply is made to an unregistered recipient, or if the consideration is AED 10,000 or less for a registered recipient.
If the VAT is charged with reference to the profit margin scheme, the tax invoice must clearly state the same and must include all other information required on a tax invoice, except the amount of VAT.
Starting an automobile business in Dubai requires careful consideration of the VAT rules and regulations, and the assistance of an experienced professional is advised. For the past 17 years, Flying Colour Tax Consultants and Flying Colour Group have been helping clients with all matters related to VAT in the UAE.
Our qualified tax consultants in Dubai can provide you with all details regarding VAT in the UAE and assist you in starting your dream venture in Dubai. Please feel free to mail your queries at info@flyingcolour.com or contact us at +971 4 4542366.
To learn more about Updated FTA Bulletin on VAT for the automotive industry, book a free consultation with one of the Flyingcolour team advisors, simply call +971 4 4542366 or send WhatsApp messages to +971 554413566. you can also drop an email to info (at) flyingcolour (dot) com.
Disclaimer: The information provided in this blog is based on our understanding of current tax laws and regulations. It is intended for general informational purposes only and does not constitute professional tax advice, consultation, or representation. The author and publisher are not responsible for any errors or omissions, or for any actions taken based on the information contained in this blog.