What All You Should Know About VAT Exemptions For Public And Private Transportation?

The UAE Federal Tax Authority or FTA has explained in detail about the exemptions that are granted by local VAT regulations to public and private transportation.

Public and private transportation are exempted from VAT and considered as zero-rated as per Cabinet Decision (No 52) of 2017 on Executive Regulations of Federal Decree-Law (No 8) of 2017.

Few transportation or transport operations which have been exempted include: 

• Local transport of passengers (not by train or bus)
• Transport originating and ending outside the UAE (outside the scope of VAT)
• transport-related services intended for cross-trade transportation (outside the scope of VAT)

Besides the above mentioned exemptions few more transactions that are related to public and private transport operations are considered as zero-rated under the UAE VAT law are given as under:

• Transportation of inbound and outbound passengers (including intra-GCC)
• Transportation of goods, inbound, and outbound (including intra-GCC)
• Transport-related services that are which are meant for transportation, inbound and outbound
• Local transport which is meant for the purpose of transportation, inbound or outbound
• International transportation, including related supplies
• Supplies of certain air, land, and seas mean of transportation e.g. aircraft and ships

The transportation transactions that are VAT-taxable at the standard rate of five percent under this law are as follows:

• Local transport of passengers in means of transport that don’t qualify for zero-rate or exemption from VAT
• Local transport of passengers in means of transport that qualify for zero-rate or exemption from VAT but for sight-seeing, pleasure, etc.
• Local transport of goods
• Transport-related services that are for the local transport of goods

So according to the local VAT regulations in UAE, the supply of means of transports which is either used in sea, air, or land, is subject to VAT at zero rates is given as under:

• Supply of train or bus that’s designed or adopted in order to be utilized for public transportation (must be for ten or more passengers).
• Supply of boat, ship, or any floating structure that’s designed or adopted in order to be utilized for commercial purposes, but isn’t designed or adapted to provide pleasure, recreation, or sports-related economic activities.
• Supply of any aircraft that’s designed or adopted in order to be utilized for commercial transport of goods and passengers, but not designed or specifically adapted for the purpose of sports, pleasure, or recreation.

With respect to above mentioned means of transport and their supply it will be the responsibility of the supplier to ensure that the means of the transport supplied will not be used for sports or recreation purposes but for the commercial purpose. 

It may be worth mentioning that all supply of services and goods which are meant for the repair and maintenance, for any means of transport will be considered as zero-rated in relation to VAT; however it is worth noting that they are subject to certain regulatory conditions.

If you have any query about vat exemptions for public and private transportation then feel free to call +971 4 4542366 today for a quality consultation or please send inquiry to info[at]flyingcolour[dot]com.

Please Note: This article was published on 29th April, 2021. The information provided in the article is based on the policies and rules applicable at the time of writing it. Talk to one of our consultants for any recent update or change.