The Federal Tax Authority (FTA) has announced that businesses must complete Corporate Tax registration within 90 days from the Date of Incorporation / MOA.
The UAE’s VAT system features specific rules that impact various industries, including transportation. Recent updates outlined in the VAT Executive Regulations highlight the application of zero-rating for certain means of transport used for commercial and public purposes. Whether you're an operator, business owner, or consumer, understanding these rules is essential for compliance and strategic planning.
What is VAT Zero-Rating?
VAT zero-rating means that the supply of certain goods and services is taxed at 0%, allowing the supplier to reclaim input VAT. This effectively reduces the tax burden on the transaction and encourages economic activity in specific sectors.
Transportation Means Eligible for Zero-Rating:
Under the VAT Executive Regulations, the following transport modes used for commercial and public transportation are eligible for zero-rating:
- Aircraft: Commercial aircraft used for passenger or cargo transportation
- Ships: Vessels used for trade, passenger services, or other commercial purposes
- Buses: Public and private buses utilized for transporting passengers
- Trains: Rail services operating for public or commercial transportation
Conditions for Zero-Rating:
To qualify for VAT zero-rating, the supply must be of a qualifying means of transport or international transport service. The transport must involve goods or passengers and be supplied by a taxable person. For domestic transport linked to international services, zero-rating applies only when the same supplier provides both parts of the service.
Operators in these sectors should review their supply chains and invoicing processes to ensure compliance. Proper documentation and understanding of the zero-rating rules can also lead to significant tax savings.
Conclusion:
The VAT zero-rating on certain means of transport is designed to promote mobility and economic growth within the UAE. By understanding the detailed regulations, businesses can better navigate their VAT obligations and optimize their financial strategies.
