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What is VAT on transportation in Dubai and Abu Dhabi?

VAT in UAE
VAT Regime in UAE

The introduction of VAT in Dubai has led to changes in all sectors including the transportation sector. The transportation sector is considered as an enabler in any economy. The recent clarification issued by FTA, classified services under private and public transportation under the Dubai VAT law.

Clarification

Private Transportation refers to all means of transportation designed for the role of transporting individuals under contracts. They are used for the transportation of a specific group of people and the supply of such services will be taxable.

Public transportation refers to all means of mass transportation used to transport individuals regardless of their category. The difference is that public transport should be available to public unconditionally.

Law

According to the Clause (4) under Article (45) of the Dubai VAT Law and the Article (34) “The supply of the means of transport shall be subject to the zero rates in the case of a supply of bus or train that is designed or adapted to be used for public transportation of ten or more passengers.

Therefore, the supply of transportation services by a bus or train intended for the use of public transportation of ten or more passengers qualify under the law. Other means of transport intended for transporting school students or employees of companies are not counted and will be subject to the standard VAT rate of 5%.

VAT rates in transportation sector

Type of Supply VAT Rate
Domestic passenger transportation (including flights within Dubai) Exempt
International transportation of passengers and goods (including intra-GCC) 0%
Supply of a means of transport (air, sea or land) for the commercial transportation of goods and passengers (over 10 people) 0%
Supply of goods and services relating to these means of transport and to the transportation of goods and passengers 0%
Other than public transport.(for commercial purpose, tourist) 5%

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