New edition of the ‘Basic Tax Information Bulletin’ on the Automotive sector

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Abu Dhabi – April 21, 2021:

The Federal Tax Authority (FTA) has announced in its latest edition of the Basic Tax Information Bulletin that motor vehicle repairs and maintenance services provided within the UAE are subject to VAT at the standard rate of 5%. This applies even if the costs are charged to an entity based outside the UAE. The new edition mainly targets businesses in the automotive sector, including new car dealers, used car dealers, and servicing and parts’ suppliers.

With regard to repair services and parts provided under a warranty, the FTA clarified that VAT is applicable on the sale of vehicles under warranty and warranty packages purchased separately by the customer. Any subsequent supply of repair services and parts to the owner of the vehicle under warranty is not subject to VAT, provided no additional amount is charged in respect of the repair service or parts.

As per the Bulletin, businesses in the automotive sector making taxable supplies are eligible for the full recovery of input VAT, with the exception of blocked items such as certain entertainment services and purchased, leased, or rented motor vehicles that are available for personal use.

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