For businesses to comply with the regulations of Value Added Tax (VAT) in the UAE, it is essential to understand its application and implications. By knowing what goods and supplies are subject to or exempt from VAT, businesses can streamline their tax procedures.
Specific financial services, local transportation, residential buildings and bare land are exempt from VAT in the UAE. Let Tax Gian break down the exemption conditions for local passenger transportation. You can receive additional guidance directly from our professional VAT agents in the UAE.
Is Local Passenger Transport Service Exempt from VAT in the UAE?
Yes, if certain conditions are met, local passenger transport service providers in the UAE can enjoy VAT exemption. In this case, VAT exempt means that the service providers will not charge any VAT to their consumers. It also means that the service providers cannot claim any input tax in the name of expenses related to providing such services. This is because the local passenger transport service is not zero-rated; it is exempt from VAT in the UAE.
Conditions for Local Passenger Transport
The following conditions have been set by VAT laws in the UAE in order for local passenger transport to be exempt from VAT liability;
- The transport service is delivered by air, water or land through a “qualifying means of transport”.
- The transport does not cross UAE boundaries, i.e., starts and ends in the country itself.
- If an aircraft is involved in the transport, it should not include any international carriage.
- The purpose of transport should not be ‘a pleasure trip,’ i.e., forms of entertainment such as catering services or sightseeing, etc.
Still unsure? Ask VAT agents in Dubai for clear insights.
What is a Qualifying Means of Transport?
One of the main conditions for VAT exemption on local passenger transport is that it must take place in a qualifying means of transport. It means that a qualifying aircraft, qualifying vessel or qualifying vehicle should be used as a means of transport for the supply to be exempt from VAT.
- An airplane or helicopter developed and utilised for the transportation of passengers from one place to another by air and licensed for the same as per the Civil Aviation Law No. 20 of 1991 can be called a qualifying aircraft.
- A vessel, such as an abra, ferry boat, or similar, developed and utilised for the transportation of passengers by water, can be called a qualifying vessel.
- A motor vehicle, such as a monorail, tram, railway train, bus, taxi, or similar vehicle, developed and utilised for the transportation of passengers by land, shall be called a qualifying vehicle.
Things to Consider
- Free zones in the UAE might have different VAT regulations for specific transportation services. Ensure you check withVAT agents in the UAE before considering yourself exempt if you operate in a free zone.
- Some international travel arrangements involving specific tourist destinations, airlines, or hotels may be eligible for zero-rating benefits. Do check with VAT agents in Dubaito get a better understanding of this.
- All VAT liabilities, such as record-keeping and reporting, are required for those suppliers benefiting from zero-rating.
FAQs
- Can I recover input tax as a local passenger transport service provider?
No, any VAT incurred in providing local passenger transport supply, which is an exempt supply, can’t be recovered.
- My airline transports passengers on a flight from the UAE to India. Will this supply be exempt from VAT in the UAE?
No, this is an international flight. For a supply to be exempt from VAT in the UAE, it should start and end within the UAE’s borders.
- My airline transports passengers on a flight from Sharjah to Dubai for sightseeing purposes. Will this supply be exempt from VAT in the UAE?
No, any transport service given with the purpose of sightseeing or for any other entertainment reasons will not be considered exempt from VAT.
How can Tax Gian Help?
As UAE VAT laws continue to evolve, it has become essential for businesses to remain vigilant at all times. Even a minor misunderstanding can lead to tax troubles.
At Tax Gian;
- Our professional VAT agents in the UAE keep you up to date, connected and informed.
- Our experts help you with financial and taxation management.
- Our qualified agents help resolve your tax issues.
Our advisors provide you with unbiased and reliable solutions.
