Public Transportation Clarification by FTA
A public statement was made by FTA to clarify on the treatment of public transportation under the UAE VAT Law, and identify what all vehicles are qualified to be treated as zero-rated under the law.
According to the Clause (4) under Article (45) of the Federal Decree-Law No. 8 of 2017 on Value Added Tax and the Article (34) of Cabinet Decision No. 52 of 2017 on the Executive Regulations (“VAT Executive Regulations”),
“The supply of the means of transport shall be subject to the zero rate 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 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 the purpose of transporting school students or employees of companies are not counted and will be subject to the standard VAT rate of 5%.
To further clarify on what is labeled as Private and Public Transportation under this law;
Private Transportation refers to all means of transportation designed for the role of transporting individuals under contracts. They are used for the transport of a specific group of people and the supply of such transport 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 the public unconditionally.
The following are the factors used to classify means of transport as Public: –
- The passengers pay for transport use or they possess a ticket from which a payment scanner or any such devices will obtain money from.
- There is a significant branding within or outside the vehicle indicating its availability to all.
- There is significant branding on the vehicle indicating its regulation by the public transportation regulating entity of each emirate.
- The means of transport was made solely with the intention of transporting the general public, with no exceptions or limitations to any groups.
School buses, Employee buses, Shuttle buses are therefore not exempted and will be subject to the standard rate of VAT.
Furthermore, transportation services shall be governed by Clause 4 of Article 46 of the VAT Law and Article 45 of the Executive Regulations which state that any supply of local passenger transport shall be exempted and encompasses motor vehicles such as taxi, bus, railway, tram, monorail etc. which are designed for the transport of the general public are to be zero-rated.
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