Only buses or trains which are designed or adapted to be used for the mass transport of individuals, without being restricted to a specific category of users, shall qualify to be supplied at the zero rate.
As a result, those means of transport which are designed to transport a specific category of individuals, such as school students or employees of a business, do not meet the conditions to be treated as a qualifying means of transport for the purposes of the zero-rating provisions. Such means of transport shall therefore be subject to the standard rate of VAT.
Whether or not the original supply of the means of transport qualified for zero rating has no impact on the VAT liability of any charges made for the supply of transportation services. The VAT liability of supplying transportation services shall be determined based on whether the transportation is local (and therefore exempt from VAT) or international (and therefore zero rated).
| Type of supply | VAT rate |
| Domestic passenger transportation (including flights within UAE) | Exempt |
| International transportation of passengers and goods (including intra-GCC) | 0% |
| Supply of a means of transport (air, sea or land) for the commercial transportation of goods and passengers (over 10 people) | 0% |
Factors relevant to identify Public Transportation:
- Features exist which allow passengers to pay for the transportation or to indicate they possess a ticket e.g. a payment booth, ticket scanner or device to take payment;
- There is branding either within or outside the vehicle advertising the transport service, indicating the transportation is available to all;
- There is branding or other features indicating regulation of the means of transport by the entity regulating public transportation in the Emirate of operation;
- The intended use of the means of transport is to transport members of the public without exception or limitation to a specific group.
Following means of transports are not be considered to be used for public transportation:
- School buses;
- Buses used to transport groups of employees or workers to or from a place of work;
- Shuttle buses used to transport hotel guests to other locations e.g. a mall, airport, park, or other tourist attraction.
Hence the and the supply of such means of transports shall be subject to VAT at the standard rate.