FTA Reaffirms VAT Zero-Rating on Commercial Transport in the UAE

The Federal Tax Authority (FTA) has reaffirmed the application of Value Added Tax (VAT) zero-rating for specific means of transport used in commercial and public transport across the UAE. This clarification, based on the provisions of the UAE VAT Executive Regulations, forms part of the FTA’s continued efforts to support proper tax compliance and enforcement in key economic sectors.

Under Cabinet Decision No. (52) of 2017, the following categories of transport qualify for 0% VAT treatment:

• Aircraft used in commercial operations, such as cargo or passenger airlines

• Ships and vessels that transport goods or passengers, including those used for commercial fishing activities

• Buses designed to carry 10 or more passengers and used as part of public transport services

• Trains operating under government-regulated public transport systems

The clarification also stresses that private transport vehicles, such as private jets, yachts, cruise ships, and employee shuttles not available to the general public, do not qualify for zero-rating and remain subject to the standard VAT rate.

In addition to the transport vehicles themselves, the FTA confirmed that zero-rating also applies to repair and maintenance services, as well as spare parts and consumables used for qualifying vehicles and vessels. This move aims to ease the tax burden on businesses operating in the UAE's transportation and logistics sectors.

The FTA advises all suppliers and transport-related businesses to maintain proper documentation proving the commercial or public nature of the transport activities to benefit from VAT zero-rating. Compliance will be reviewed as part of regular tax audits.

Businesses seeking clarity on VAT application or support in preparing the required documentation are encouraged to consult professional VAT consulting services to ensure compliance and maximize benefits under the current regulations.

For further information, stakeholders are urged to refer to the UAE VAT Executive Regulations and consult FTA Approved Tax Agent