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The UAE Federal Tax Authority (“FTA”) has recently issued two new public clarifications to clarify the VAT treatment of (i) the supply of public transportation and transportation services; and (ii) the supply of farm land and buildings.
1. Clarification on supply of ‘Public Transport’ & ‘Transportation Services’
In the Public Clarification VAT P007, the FTA confirms that zero-rating will only be applicable to the supply of buses or trains which are designed or adapted to be used for the mass transport of individuals, without being restricted to a specific category of users. However, zero-rating is not available on the means of transportation used to transport a specific group of people under separate contracts. The clarification provides certain factors that would be indicative of whether a bus or train is designed or adapted for use of public transportation.
Examples of supplies of public transportation that qualify for zero-rating (0%) include:
Examples of supplies of public transportation that is subject to 5% VAT include:
2. Clarification on supply of ‘Farm Land’ & ‘Farm Buildings’
In the VAT Public Clarification P008, the FTA confirms the VAT treatment of farm land and farm buildings. The key takeaways of this clarification are as follows:
What should you do next?
Businesses should consider the implications of these clarifications on their transactions to ensure the correct VAT treatment on supply of public transport and farm lands or buildings.
How we can help?
Al Tamimi can assist you to assess the impact of these clarifications, and advise you on the VAT treatment of your affected transactions as well as the recoverability of input VAT.
Please do not hesitate to contact Al Tamimi’s Tax Team if you require any assistance.