What Changed on 1 June 2026?
Effective 1 June 2026, the UAE Federal Tax Authority's revised treatment brings the following into the scope of 5% VAT:
- Salik toll charges: every toll deduction now carries 5% VAT.
- Salik tag activation fees: the one-time fee to activate a Salik tag is now taxable.
- Parkin parking services in Dubai: on-street parking, off-street parking, parking permits, reservations, and seasonal parking subscriptions are all subject to VAT.
Previously, these charges sat outside the scope of VAT and were recorded simply as expenses. That is no longer the case, and businesses that keep treating them the old way will misstate both their costs and their VAT recovery position.
Is This a New Tax or a Rate Change?
No. This is neither a new tax nor a change to the UAE's standard VAT rate, which remains 5%. What has changed is the VAT treatment of specific services. Salik and Parkin charges have moved from being outside the scope of VAT to being taxable supplies. The legislation and rate are unchanged; only the classification of these particular services has been revised.
Which Services Are Now Subject to VAT?
| Service | VAT Treatment (from 1 June 2026) |
| Salik toll charges | 5% VAT applies |
| Salik tag activation fee | 5% VAT applies |
| Parkin on-street parking | 5% VAT applies |
| Parkin on-street parking | 5% VAT applies |
| Parking permits | 5% VAT applies |
| Parking reservations | 5% VAT applies |
| Seasonal parking subscriptions | 5% VAT applies |
How Does This Affect Businesses With Vehicle Fleets?
For businesses that rely on road travel, including logistics operators, delivery fleets, sales teams, and field-service providers, this changes the VAT profile of a recurring operating cost that was previously invisible to the VAT system.
A Practical Example: Fleet Operator
Consider a delivery business running a fleet of vehicles across Dubai. Previously, its monthly Salik and parking costs sat outside VAT and were simply recorded as expenses. Under the revised treatment, each of those charges now carries 5% VAT. This has two effects: the gross cost of operating the fleet rises slightly, feeding into pricing and margin, and, the part that is easy to miss, the VAT element may be recoverable as input tax, provided the expense is for business use and properly documented. A business that updates its accounting to capture this can reclaim the VAT it is entitled to; one that doesn't will quietly absorb a recoverable cost. Across a large fleet over a year, that difference is not trivial.
Areas businesses should review immediately include:
- Accounting and VAT coding for Salik and parking expenses
- Employee expense-reimbursement policies
- Fleet-management and transportation-cost tracking
- ERP system configurations and expense categories
- Supporting documentation required for VAT recovery
Can Businesses Recover VAT on Salik and Parking Costs?
For VAT-registered businesses, VAT incurred on Salik and parking expenses may generally be recoverable as input tax, provided:
- The expense is incurred for genuine business purposes
- Appropriate supporting documentation is maintained
- No specific input-tax restrictions apply under UAE VAT legislation
Businesses should pay particular attention to expenses involving private or mixed-use vehicles, where input-tax recovery may be restricted. The practical key to recovery is documentation: without valid evidence linking the cost to a business purpose, the input VAT may not be claimable even where the expense is legitimate.
What Happens With Recharges and Reimbursements?
Where toll or parking costs are recharged to customers, employees, or related parties, the VAT treatment of the onward charge must be evaluated separately. The treatment can differ depending on whether the transaction is a reimbursement, a disbursement, or part of a wider taxable supply. A disbursement passed on at cost is treated differently from a cost that forms part of the price of a service the business is supplying. Clear invoicing procedures and proper documentation are essential to avoid either over-charging or under-charging VAT.
How Does This Affect Individual Road Users?
The change is not limited to businesses. Individual road users will also see 5% VAT applied to tolls, tag activation, and parking. While the per-transaction amount is small, it adds up for frequent commuters, and unlike registered businesses, individuals cannot recover this VAT.
What Should Businesses Do to Stay Compliant?
To ensure compliance with the updated treatment, businesses should:
- Update accounting systems and VAT mappings to capture VAT on Salik and parking
- Review expense-claim and reimbursement processes so employees capture VAT correctly
- Reassess input-tax recovery procedures, especially for mixed-use vehicles
- Train finance and operations teams on the revised treatment
- Review customer-recharge arrangements and invoicing practices
Why Periodic VAT Reviews Matter
The broader lesson from this change is that the VAT treatment of routine, everyday costs is not fixed forever. Services once outside the scope of VAT can be brought within it, and a business that assumes its expense categories are settled may continue to mis-record costs for months before noticing. A simple safeguard is to review the VAT treatment of major recurring expenses on a regular schedule, at least annually, and whenever a notable regulatory announcement is made. Catching a change early protects both compliance and the input VAT a business is entitled to recover.
Stay VAT Compliant in the UAE
Ensure your business is prepared for the latest VAT changes. Connect with Legacy Partners for expert UAE VAT guidance and compliance support; info@legacypartners.ae
Updated On: 29 Jul, 2026
