No VAT on UAE air travel

No VAT on UAE air travel

28 Aug 2017

Good news for local residents

The UAE is home to more than eight million expatriates from over 200 countries, who fly home regularly.  

Dubai International Airport is one of the world's busiest, receiving 43 million passengers in the first half of 2017. In addition, a record 8.06 million international overnight tourists arrived in Dubai during the first six months of 2017, cementing the UAE's position as a travel hub.

With the pending introduction of value added tax (VAT) in the country, it is essential to find out how air travel will be affected.

The UAE will implement five per cent VAT on goods and services from January 2018 as part of a GCC-wide agreement. "Very important to the wider public is the subjecting of the education and healthcare sectors to zero rate. Tuition fees will, therefore, not increase. The same holds for preventive and basic healthcare," said Thomas Vanhee, founding partner, Aurifer Middle East Tax.

There will also be no VAT on air travel. Air transport of passengers and goods which starts or ends in the state or passes through its territory, including related services, have been categorised as zero-rated under the VAT law, reports Khaleej Times.

"International transportation (including airlines) is zero-rated. Similarly, the supply of local transport is exempt from VAT. The supply of international transportation of passengers and/or goods and its ancillary services are also zero-rated. The supply of local passenger transport in a qualifying vehicle, vessel or aircraft too is exempt from VAT," said Girish Chand, director MCA Chartered Accountants.

Saj Ahmad, chief analyst at StrategicAero Research, said that it's a good move to spare air travel as it would help keep fares lower. "This is key to ensuring demand stays positively stimulated. It also demonstrates the diversity of the UAE economy so that it doesn't have to tax obvious lines of business that would hit the pockets of travellers."

Ghaith Al Ghaith, CEO of flydubai, welcomed the decision of the Ministry of Finance to include the international transportation industry and related supplies under the zero-rated category.

"Flydubai's pricing strategy takes into consideration multiple factors, including the currency rates, oil prices and supply and demand. We remain committed to offering passengers the best value for their money and playing an important role in supporting the UAE, and Dubai in specific, in maintaining its position as one of the world's leading aviation hubs," added Al Ghaith.

We're glad our travel plans won't be affected by VAT! Aren't you?