Travel Agent vs Tour Operator in the UAE | VAT, Compliance & Risk

Travel Agent vs Tour Operator in the UAE | VAT, Compliance & Risk

Link to full global version: Travel Agent vs Tour Operator | Financial, Accounting & Tax differences explained

In the UAE, most licensed travel companies wear two hats, agent and operator, sometimes within the same transaction. The Federal Tax Authority treats both as taxable suppliers, but the VAT outcome depends on where the travel takes place.

Domestic tourism services such as hotels, desert safaris, or city tours attract 5% VAT, while outbound packages consumed entirely outside the UAE are zero-rated. That means a Dubai-based DMC arranging inbound excursions charges VAT, but if it sells a package for Europe through its UAE entity, the supply is taxed at 0%.

The key financial risk lies in incorrect VAT coding and cash-flow timing. Tour operators often prepay suppliers but recognise revenue later, creating liquidity gaps if VAT is misapplied. Clear segregation between taxable, zero-rated, and agency transactions is essential for accurate reporting and audit readiness.

For a deeper look at how this plays out financially across the U.K., U.S., and U.A.E., including examples of margin accounting and merchant-of-record analysis, read our full article.

References

• Federal Tax Authority (FTA). (2024). VAT refund scheme for tourists. UAE Government Portal. https://tax.gov.ae/en/taxes/Vat/refunds/tourists.aspxRelevance:

• Federal Tax Authority (FTA). (2025). Guides, References & Public Clarifications. https://tax.gov.ae/en/taxes/vat/guides.references.aspxRelevance:

Disclaimer

This article is for general informational purposes only and does not constitute legal or financial advice. Regulations and fees can change; always verify details directly with the Dubai Department of Economy and Tourism before applying.