Supplies made by businesses in the automotive sector are generally subject to VAT in the UAE. Qualified means of transportation such as buses are designed and used for public transportation of 10 or more passengers and are zero-rated. However, the sale of new used cars, sale of car parts and services rendered by service centres come under the standard rate of 5%.
The Federal Tax Authority (FTA) has recently released a Basic Tax Information Bulletin that offers detailed insights on the VAT obligations for new car dealers, used car dealers servicing & parts suppliers. The bulletin discloses tax obligations including VAT registration in the UAE, tax invoices, recovery of input taxes etc. with a special focus on car dealers, service centres and automotive parts suppliers. Read ahead for more details: