Selling the trip, or arranging it?
One question decides reported revenue by an order of magnitude — and a great many UAE travel businesses have never answered it explicitly.
Almost every accounting question in travel reduces to one: are you selling the trip, or arranging it? The answer changes reported revenue by an order of magnitude, and a great many UAE travel businesses have never answered it explicitly.
Principal or agent
| Agent | Principal | |
|---|---|---|
| Typical role | Books a flight or hotel on the customer's behalf | Assembles and sells a package in its own name |
| Revenue recognised | Commission or service fee only | The full amount charged to the customer |
| Cost of sale | None on the ticket itself | The supplier cost of flights, rooms and transfers |
| Who bears the risk | The supplier | The travel business — inventory, cancellation and price risk |
| Effect on reported turnover | Small revenue, high margin percentage | Large revenue, thin margin percentage |
The test under IFRS 15 is control: does the business control the travel service before it is transferred to the customer? Indicators include primary responsibility for fulfilment, inventory or cancellation risk, and discretion in setting prices. It is decided on substance, not on how the invoice is worded — and a business that reports gross when it is really an agent will have its revenue restated by the first serious buyer or lender who looks.
The rest of the sector's specifics
- Deposits and advance payments — customer money received long before travel is a contract liability, not revenue, and for a tour operator it can be the largest number on the balance sheet.
- Recognition point — revenue on a package is generally recognised when the travel is delivered rather than when it is booked or paid for.
- Cancellations and amendment fees — recognised separately, and provided for where the business bears refund obligations.
- Supplier prepayments and allocations — advance purchases of room or seat allocations are prepayments carrying real risk, and need reviewing for recoverability rather than sitting indefinitely.
- Foreign currency — buying in one currency and selling in another, with a gap of months, is an exposure that should be measured rather than discovered.
- VAT — the treatment of travel supplies depends heavily on where the underlying service is performed and on the principal/agent analysis, so the VAT position follows the substance question rather than being separable from it.
Reporting gross makes a travel business look many times larger. It also makes its margin look catastrophic, brings it over VAT and tax thresholds sooner, and — if the substance does not support it — is a misstatement. The right answer is whichever one the contracts and risk allocation actually support, documented once and applied consistently.
Reviewed 18 August 2026 by Ahmed Nabil Selim. UAE tax rates, thresholds and deadlines change — confirm the position for your period before relying on it.
Travel & tourism — frequently asked questions
Whichever the substance supports. Under IFRS 15 the question is whether the business controls the travel service before transferring it to the customer — indicators include primary responsibility for fulfilment, exposure to inventory and cancellation risk, and discretion over pricing. A pure booking agent recognises only its commission or service fee; a tour operator assembling and selling a package in its own name, bearing the risk, recognises the gross amount with the supplier cost as cost of sale. The distinction is decided by the contracts and risk allocation, not by preference.
Generally when the travel is delivered rather than when it is booked or paid for. Deposits and balances received in advance are contract liabilities until the performance obligation is satisfied, which for most packages means departure or the period of the stay. For a business with long booking lead times this creates a substantial deferred balance and a real difference between cash position and earned revenue — a distinction that needs to be visible in the reporting, because the cash is not yet the business's own.
It depends principally on where the underlying service is performed and on whether the business acts as principal or agent. Transport and accommodation supplied outside the UAE, and qualifying international transport, are treated differently from services supplied domestically, and an agent's commission is a separate supply from the travel itself. Because the analysis follows the principal/agent conclusion and the place of supply rules together, it should be mapped once across the business's actual product set rather than decided transaction by transaction.
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