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United Arab Emirates

30 July 2021

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UAE Federal Tax Authority Publishes VAT Guide for the Automotive Sector

The UAE Federal Tax Authority has published a VAT Guide for the Automotive Sector (VATGAM1), which is dated 29 June 2021. The guide covers the VAT treatment of the sale of cars in the UAE, the sale of used/pre-owned cars in the UAE, the lease of cars, the export of cars, the import of cars, and other related matters.

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Overview

Short brief

VAT was introduced with effect from 1 January 2018 in the United Arab Emirates ("UAE"). As a general consumption tax on the supply of goods and services, it applies to taxable supplies which take place within the territorial area of the UAE.

Businesses in the automotive sector in the UAE are principally engaged in the trading of cars. The cars in question are usually manufactured overseas and are sold in the UAE through a network of authorized distributors. This guide discusses the VAT implications of certain activities common within the automotive sector, particularly in respect of the sale of cars, the import and export of cars and warranty supplies.

Purpose of this document

This document contains guidance about the VAT treatment of supplies made by motor vehicle dealers in the UAE including but not limited to the supply of new cars, the supply of used/ second-hand cars, supplies under warranty and the export and import of cars.

The purpose of this document is to provide guidance on how VAT affects businesses which operate within the automotive sector.

Who should read this document?

This document should be read by anyone responsible for tax matters in the automotive sector in the UAE, as well as their tax agents. It is intended to be read in conjunction with other relevant guidance published by the Federal Tax Authority ("FTA").

Status of the document

In this guide, Federal Decree-Law No. 8 of 2017 on Value Added Tax is referred to as "Decree-Law" and Cabinet Decision No. 52 of 2017 on the Executive Regulation of the Federal Decree-Law No. 8 of 2017 on Value Added Tax and its amendments is referred to as "Executive Regulation". This guidance is not a legally binding statement, but is intended to provide assistance in understanding and applying the VAT legislation.

This guide is issued in accordance with Article 73 of the Executive Regulation and provides general guidance concerning the application of the Decree-Law and Executive Regulation in respect of the business activities within the automotive sector in the UAE.

It should be noted that this guide is not intended to provide comprehensive details associated with VAT and is not intended for legal reference but as a framework discussing VAT issues relevant specifically to the automotive sector. As a consequence, the guide does not provide an overview of the general operation of VAT but assumes that the reader already has an understanding of the basic principles of VAT. For details in respect of the general operation of VAT, refer to the Taxable Person Guide – Value Added Tax which is available on the FTA website (www.tax.gov.ae).

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