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  • FTA Bulletin - VAT update for the Automotive Industry

FTA Bulletin - VAT update for the Automotive Industry

11 April 2021

The Federal Tax Authority (‘FTA’) has published a Basic Information Bulletin for the automotive sector. The bulletin is brief but includes some important reminders for automotive traders. It confirms the  standard rules relating to VAT, such as rules on registration, invoicing and input tax recovery, and mentions four areas that may be of particular interest to the automotive sector.

Profit Margin Scheme

The scheme can be used for goods that have previously been subject to VAT – such as used cars. It allows the seller to account for VAT on the profit margin of each sale made under the scheme rather than on the total selling price. The scheme is subject to special conditions, including record keeping and invoicing requirements. Any business wishing to use the scheme must make sure the conditions are fully understood and are complied with.   


Where businesses give away goods free, VAT is likely to be due on the ‘deemed supply’ of the goods unless:

  • Input tax was not claimed on the goods concerned.
  • The value to each recipient does not exceed AED 500 in a 12 month period.
  • The output tax for all deemed supplies per person in the 12 month period is less than AED 2,000.

Warranty sales

The bulletin confirms that sales of vehicles that include warranty, and warranty packages sold separately, are both subject to VAT at the standard rate.

However, any subsequent supply of repairs or parts made under these warranties will not be subject to VAT.

Warranty work carried out for overseas manufacturers

The bulletin confirms that if a UAE service centre carries out repairs in the UAE, the work will be subject to VAT at the standard rate, even if the charge is made to an entity outside the UAE.

If you need further information on any of these points, please contact any of our VAT specialists.