Dubai’s toll operator has announced 5% VAT on all Salik usage fees and tag activation charges from 1 June 2026 – ending years of zero-burden toll usage. These advisory analyses the UAE VAT law implications for businesses.
Key Insights
- From 1 June 2026, Salik will apply 5% VAT to all Salik toll charges and tag activation fees in the UAE.
- Businesses may recover the VAT as input tax if the vehicles are used for taxable business activities.
- VAT recovery depends on vehicle classification and business-use eligibility under UAE VAT rules.
- Companies should update accounting software and VAT codes before the effective date.
- Valid FTA-compliant tax invoices or statements will be required for input tax recovery.
- Mixed-use vehicles may require VAT apportionment between business and personal usage.
- Fleet-heavy businesses such as logistics, hospitality, and construction may see meaningful annual VAT recovery opportunities.
5% VAT Rate Applied | 1 Jun 2026 Effective Date | 2 Taxable Supplies Added |
Background: Why This Matters
Since UAE VAT was introduced on 1 January 2018, Salik toll gate charges have operated outside the formal VAT framework for end users – not explicitly zero-rated under a specific schedule but effectively treated as a government-linked charge without a VAT component in practice.
Salik Company PJSC has now announced that from 1 June 2026, it will levy standard-rate VAT of 5% on toll gate passage fees and tag activation charges, with amounts remitted directly to the Federal Tax Authority (FTA). Simultaneously, Parkin Company PJSC – Dubai’s largest parking operator – has made an identical announcement for all parking services.
Advisory Note This is not a price increase by Salik – the underlying toll tariff remains unchanged. The 5% VAT is a separate tax charge layered on top of the existing fee. However, for businesses entitled to input tax recovery, the net economic cost may actually be zero, provided the conditions for recovery are met. |
The Two Newly Taxable Supplies
The announcement covers two distinct supplies, each with separate VAT treatment implications:
Supply 1 Toll Gate Usage Fee — Charged per passage through a Salik gate. Rates: AED 6 (peak: 6–10am, 4–8pm) or AED 4 (standard). VAT of 5% applies to each passage. This is a recurring, transaction-level taxable supply. | Supply 2 Tag Activation Charge — A one-time fee charged when a new Salik RFID tag is activated on a vehicle. Also subject to 5% VAT. Relevant for fleet operators adding new vehicles — timing of activation may affect input tax periods. |
Input Tax Recovery: The Key Opportunity
For VAT-registered businesses, the introduction of a tax charge where none previously existed creates a new input tax recovery opportunity. Under Article 54 of Federal Decree-Law No. 8 of 2017 (UAE VAT Law), a taxable person may recover input tax on goods or services acquired for the purpose of making taxable supplies.
This means that if your business uses company vehicles that regularly transit Salik gates — delivery fleets, sales representatives, field service teams, site visits — and those vehicles are used for taxable business activities, the 5% VAT on toll charges should be recoverable in your VAT return.
Illustrative Recovery Calculation
Example: Fleet of 10 company vehicles, 20 gate passages per vehicle per month (peak rate)
Monthly toll charges (10 vehicles × 20 passages × AED 6) | AED 1,200 |
VAT at 5% | AED 60 |
Total Salik debit per month | AED 1,260 |
Recoverable input tax (if eligible) | AED 60 / month |
Annual input tax recovery | AED 720 / year |
While the per-vehicle figure may appear modest, for businesses with larger fleets or high-transit routes — logistics, construction, hospitality, facilities management — the aggregate recoverable VAT across a full year can be material and worth tracking correctly from Day 1.
The Blocked Input Tax Rule: A Critical Caveat
UAE VAT law contains a specific input tax blocking provision for motor vehicles under Cabinet Decision No. 52 of 2017. However, the block is more nuanced than it first appears, and businesses must not assume a blanket denial of recovery.
- BLOCKED: Motor car acquisition: Input tax on the purchase, lease, or hire of a “motor car” (as defined) used for personal or mixed-use purposes is blocked. This does not extend to running costs.
- RECOVERABLE: Running costs of exclusively business-use vehicles: Where a vehicle is used exclusively for business purposes (delivery trucks, ambulances, taxis, construction site vehicles), running costs including fuel, tolls, and maintenance should be recoverable.
- MIXED-USE vehicles: Where a company car is used for both business and personal purposes, input tax on tolls must be apportioned. Businesses should document a reasonable apportionment basis and apply it consistently.
- COMMERCIAL TRANSPORT OPERATORS: Freight carriers and logistics companies using vehicles that are not “motor cars” (trucks, vans, HGVs) should have full recovery available on Salik charges as a business cost.
Risk Point Do not automatically post all Salik VAT as recoverable input tax without reviewing the vehicle-use classification in your fleet register. The FTA may query bulk recovery claims on toll charges if company vehicles are of the motor car type and employee used. |
Tax Invoice Requirements
For input tax recovery to be valid, the taxable person must hold a valid tax invoice in the format prescribed under UAE VAT regulations. This is where the practical complexity lies for Salik charges, which have historically been deducted via the RFID tag from a prepaid balance — not via an invoice-based transaction flow.
- Verify that Salik’s updated billing system issues FTA-compliant tax invoices (including TRN, date, description, amount, VAT amount).
- Ensure that billing/account statements downloaded from the Salik portal qualify as simplified tax invoices (for transactions under AED 10,000).
- For large fleets, consider whether a consolidated monthly tax invoice arrangement with Salik is available.
- Update your accounting software or ERP to post Salik VAT to a dedicated input tax GL account from 1 June 2026.
Impact on Financial Statements and Expense Accounting
For businesses that account for Salik charges as a travel or transport expense, the VAT treatment changes the gross-to-net split effective 1 June 2026.
Before 1 June 2026 100% of the Salik charge is recorded as a transport expense. No VAT element. No input tax account entry required. | From 1 June 2026 The net toll charge is posted to transport expenses; the 5% VAT is posted to input VAT (recoverable) or disallowable input tax — depending on vehicle-use classification. |
For clients on Zoho Books, QuickBooks Online, or Xero, this requires updating the tax code assigned to Salik transactions. The relevant tax code should be SR (Standard Rate — 5% Input) or equivalent, rather than the previous ‘Out of Scope’ or ‘No VAT’ classification.
Important: Account Top-Up vs. Taxable Event
The VAT applies at the point of toll gate usage and tag activation — NOT at the point of account recharge. Recharging a Salik prepaid wallet is not itself a taxable supply event. The tax obligation arises when the toll is actually consumed.
Businesses should not attempt to recover input tax based on top-up receipts; recovery must be based on the tax invoice or statement evidencing actual gate passages.
Implications for Partially Exempt Businesses
Businesses that make both taxable and exempt supplies (financial services, insurance, certain real estate operators) must apply their Input Tax Apportionment method to Salik charges if the vehicles serve both exempt and taxable activities. The recoverable portion will be determined by the standard attribution and apportionment methodology agreed with the FTA or applied per the default method.
For most commercial businesses making wholly taxable supplies, this is not a concern. But mixed-activity entities should flag this to their VAT compliance team.
Pre-June 1 Compliance Action Checklist
01 | Review your fleet register and classify each vehicle as exclusively business-use, motor car (mixed), or commercial vehicle (truck/van) to determine input tax recovery eligibility. |
02 | Update your accounting software — change the Salik expense tax code from ‘Out of Scope / No VAT’ to the appropriate 5% standard-rated input tax code effective 1 June 2026. |
03 | Contact Salik to confirm that your corporate account will generate FTA-compliant tax invoices or simplified tax invoices from June onward, and update your document archiving workflow. |
04 | For mixed-use vehicles, establish and document an apportionment ratio for business vs. personal use — this will be your input tax recovery basis for all running costs going forward. |
05 | Notify your payroll/HR team: if Salik charges are reimbursed to employees, the reimbursement process should capture VAT-inclusive amounts and the employee must provide a valid tax invoice. |
06 | For clients with large fleets (logistics, facilities, hospitality), quantify the annual input tax recovery opportunity and ensure it is correctly captured in VAT returns from the Tax Period covering June 2026. |
07 | Review your VAT return preparation checklist — add a dedicated Salik input tax line to ensure completeness in every future tax period. |
Final Thoughts
The Salik VAT change, while modest in its per-transaction impact, is a meaningful compliance event. It requires businesses to update their VAT coding, reassess input tax positions on vehicle running costs, and ensure proper documentation is in place from Day 1 of the new regime. The businesses most at risk are those that absorb the new 5% as a pass-through cost without claiming back the input tax they are entitled to — effectively paying a tax they need not bear.
The mirror announcement from Parkin on parking services follows the same logic and should be treated identically. If your business incurs Dubai parking charges through company vehicles, the same analysis applies.
At Map My Books, we are proactively reviewing fleet expense treatment for all relevant client portfolios ahead of the 1 June 2026 effective date. If you have questions about how this change affects your VAT return, input tax recovery position, or expense accounting setup, please reach out to your Map My Books advisor.
Map My Books | Accounting & Tax Advisory | Dubai, UAE
This advisory is prepared for general informational purposes only and does not constitute formal tax or legal advice. Specific circumstances may vary. Businesses should seek professional VAT advice before making compliance decisions based on this content. All references are to UAE Federal Decree-Law No. 8 of 2017 on VAT and associated Cabinet Decisions and FTA guidance in force as of the date of publication.