VAT on Salik in the UAE: The New Introduction, what the UAE motorists need to know
In the UAE, the introduction of the toll system was one of the key parts in the digital management of traffic by the RTA. With the recent update, we will now see that these toll charges (Salik) are also to be treated under the UAE’s VAT requirements.
In this blog, we will dive into the topics of what VAT on Salik means, when it apply and its impact on motorists and business entities.
1. What is Salik?
Salik is Dubai’s electronic toll collection system operated by Salik Company PJSC. This is just as the regular toll charges collection system is operated in other countries as well. It uses RFID-enabled tags linked to a prepaid account, allowing vehicles to pass through toll gates without stopping. Every time a vehicle crosses a Salik gate, a fixed toll fee is automatically deducted. Just the normal process for every toll pass.
2. Understanding VAT in the UAE
We all know that the UAE introduced Value Added Tax (VAT) on 1 January 2018 at a standard rate of 5% / 0% / Out of Scope / Exempt depending on the services provided. VAT is an indirect tax applied to most goods and services, where business entities collect VAT from their consumers and remit it back to the Federal Tax Authority (FTA).
During this course of action, some government services were initially exempt or treated differently depending on the type of transactions.
3. Is VAT applicable to Salik?
During the initial days, there was confusion on whether VAT would apply to the Salik charges as well. However, when the VAT was introduced, the authorities had clarified that the Salik charges were not subject to VAT (as on their evaluation in 2018).
However, things are not the same today.
Key update (effective 2026):
There was a recent announcement, which confirms that VAT at 5% will be applied on Salik usage fees and tag activation charges starting 1 June 2026. This means, going forward:
- Every Salik transaction will include VAT
- Tag activation and related service fees are also taxable
- VAT collected by Salik will be remitted to the UAE FTA
4. What exactly will be taxed?
To be more specific, from 1 June 2026 onward, VAT applies to:
- Salik gate crossing fees
- Salik tag activation charges
- Related administrative or service fees (wherever applicable)
Example:
If a toll is AED 4, now the total charge becomes AED 4 + 5% VAT = AED 4.20
5. Why has VAT been introduced on Salik now?
This is the question of all motorists in the UAE: if it was not required in 2018, what has changed now?
The charges of VAT on the Salik services will now be aligned to the UAE’s broader tax framework, and the UAE wants to ensure consistency in the taxation of services across sectors.
However, the key reasons include:
- Standardising the VAT treatment across transport services
- Strengthening the government revenue collection
- Aligning all the toll systems with other taxable public services
6. Impact on motorists
Introduction of the VAT on the Salik has a direct impact on the motorists in the UAE
- For individual drivers, there is gonna be a slight increase in daily commuting costs
- For businesses and fleets, this can lead to higher operating costs for logistics, delivery, and ride-hailing companies; the input VAT may be recoverable if the entity is VAT registered.
7. Impact on VAT-registered businesses
As mentioned, if the business entities are registered for VAT, then they may be able to:
- Claim the input VAT on Salik expenses and
- Offset the VAT against output tax in their VAT returns.
- However, it is mandatory to maintain proper documentation for compliance.
Thus, the introduction of VAT on the Salik will have a greater impact on the motorist and the business entities of the UAE, and it is a new update in the UAE’s transport system. A proper planning and recovery system will be required to maintain well.
FAQ: VAT on Salik in the UAE
1. Is VAT now applicable to Salik charges in the UAE?
Yes. Effective from 1 June 2026, VAT at 5% will be applied on Salik toll usage fees, tag activation charges, and certain related service fees in the UAE.
2. How much VAT will motorists pay on Salik?
Motorists will pay an additional 5% VAT on applicable Salik charges. For example, if a Salik toll fee is AED 4, the total amount charged after VAT will become AED 4.20.
3. Can businesses recover VAT paid on Salik expenses?
Yes. VAT-registered businesses may be able to recover the input VAT paid on Salik expenses, provided the costs are incurred for business purposes and supported with proper documentation and tax records.
4. Why was VAT introduced on Salik now?
The UAE introduced VAT on Salik to align toll services with the country’s broader VAT framework, standardise taxation across transport-related services, and strengthen overall tax compliance and revenue collection.
5. What services related to Salik are subject to VAT?
From June 2026 onward, VAT applies to:
- Salik gate crossing fees
- Salik tag activation charges
- Related administrative and service fees, where applicable
To learn more about VAT on Salik in the UAE, book a free consultation with one of the Flyingcolour team advisors.
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.