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Airline tickets, cargo to be zero-rated under VAT

While air fares, on-board products will not be taxed, some on-ground services will be

Gulf News

Dubai: If you’re worried about higher prices next year as Value-Added Tax (VAT) gets rolled out across most product categories, you can expect some respite in the aviation industry.

According to article 33 of the executive regulations on VAT, transporting passengers in and out of the country is subject to zero tax rates, meaning it’s not just your airfares that won’t be taxed; cargo is also zero-rated.

As per the regulations, transporting passengers into or out of the UAE by sea or air is zero-rated. Additionally, goods supplied for use or consumption or sale by or on an aircraft or a ship are zero-rated.

In a statement to Gulf News, a flydubai spokesperson confirmed that as per the UAE’s Ministry of Finance, the international transportation industry and related supplies are on the zero-rated list of industries.

An earlier statement from flydubai had said that zero-rated goods and services include ticket fares, on-board products, and extras such as upgrades to Business Class, extra-legroom seats, and additional baggage.

Similarly, Emirates airline confirmed that all its flight tickets and flight-related services such as extra baggage and cabin upgrades as well as on-board duty-free sales will not be taxed.

Other services

However, some on-ground services will be subject to VAT. Emirates Group said that other services will be taxed from January 1 in compliance with the UAE Federal Decree on VAT.

“Pay-per-entry charges for the Emirates Lounges at Dubai International Airport will be subject to VAT at the standard rate. All airport meet-and-greet services, ground excursions and tours, as well as inbound holiday packages (except for the flight component) will be subject to VAT at the standard rate,” an Emirates spokesperson told Gulf News.

Inbound holiday packages will be taxed as they would include activities and services in the UAE that are subject to VAT.

However, outbound travel packages purchased from Emirates Holidays or dnata Travel will be either zero-rated or out-of-scope for UAE VAT purposes, the spokesperson added.

And the rules are much the same across the industry.

An Etihad Airways spokesperson also said the carrier is not charging VAT on its services including air tickets, lounge access and chauffeur services, as they are already provided as complementary services to passengers in Business and First Class.