VAT applicability on private passenger transport

We have a transportation company in the UAE.

We give a trailer, car van on rent so some of our clients say that on this transportation VAT is not applicable. So I need a clear view of this.

Dear Questioner,

As I understand from your inquiry, you are not providing the transport service yourself.

You are renting cars, which means you are renting means of transport. In this case, your services are not providing means of transport.

In this case, I assure you that your services are subject to the VAT at the rate of 5% for the services you provide to your clients and customers.

Your Invoices must have the header as tax invoice and must include 5% of the total service value additionally claimed from your customers as you will have to file your tax return to the FTA on quarterly bases and you must pay the collected 5% after deducting the taxes you paid on your taxable expenses as well.

All the above is subject to your registration with the FTA and that you have a TRN number.

Thank you for your help.

Are there any rules related to this, and could you please tell me about them? 

Dear Questioner,

Transport Services are exclusively "zero-rated" and "VAT-exempt" provided that it falls under cabinet decision 52 of 2017.

Article 34 - zero-rating certain means of transport:

The supply of the means of transport shall be subject to the zero-rate in the following cases:

1. A supply of an aircraft that is designed or adapted to be used for commercial transportation of passengers or goods and which is not designed or adapted for recreation, pleasure or sports.

2. A supply of a ship, boat or floating structure that is designed or adapted for use for commercial purposes and which is not designed or adapted for recreation, pleasure or sports.

3. A supply of bus or train that is designed or adapted to be used for public transportation of (10) or more passengers.

Thank you so much!

Art 45- Exemption of Local Passenger Transport Services

1. The supply of local passenger transport services in a qualifying means of transport by land, water or air from a place in the state to another place in the state shall be exempt.

2. The phrase “qualifying means of transport” means:

a. A motor vehicle, including a taxi, bus, railway train, tram, mono-rail or similar means of transport, designed or adapted for transport of passengers.

b. A ferry boat, abra or other similar vessel designed or adapted for transport of passengers.

c. A helicopter or aeroplane designed or adapted for transport of passengers and approved for transport of passengers in accordance with Federal Law No. (20) of 1991 on Civil Aviation.

It means we are under VAT, but some of our clients (companies) do not agree with this.

The FTA has not provided clear rules on whether VAT is applicable to our services or not, so they have not accepted it.

If there is a simple way to help them understand that VAT is applicable to our service, could you please advise? Your advice would be really helpful for me.

THANK YOU!