VAT Refund Scheme for Foreign Business Visitors in UAE

VAT refund for Foreign Business Visitors VAT refund for Foreign Business Visitors

The UAE’s Federal Tax Authority (FTA) announced the implementation of the VAT refunds scheme for business visitors on Tuesday. Those who are qualified for refunds can apply through a form available on the website.

The minimum VAT amount business visitor can reclaim is fixed at Dhs2,000, which may encompass a single purchase or multiple purchases.

The Authority behested potential applicants to keep the original tax invoices of the purchases for which they would like to reclaim VAT, as they will have to submit them along with their applications as an attestation.

What is the business VAT refund scheme?

Under the VAT Refund scheme for Business Visitor in UAE, if all the require condition met for a foreign business visitor then, He is allowed to claim VAT refund on expense occurred in UAE.

When FTA start receiving VAT refund applications?

UAE’s FTA already start receiving VAT refund applications from business visitors

The FTA said that it is now receiving applications to refund VAT incurred by business visitors to the UAE in 2018.

Khalid Ali Al Bustani, FTA Director General, said “The new clear and transparent procedure complements efforts to establish the UAE as a global hub for trade and creates an investment-friendly environment to support economic activities in the sectors where business visitors are active. This, in turn, reflects positively on various other sectors such as trade, exhibitions, and conferences, among others,”

He explained, “Reciprocity is a key condition for the procedure, whereby the authority will collaborate with countries that refund VAT for UAE businesses visiting their territories,”.

Who is a foreign business visitor?

Al Bustani further added, “The procedure abides by Federal Decree-Law No. (8) of 2017 on VAT and its Executive Regulations, which call for refunding taxes on supplies or imports made by a Person not residing in the UAE or any of the Implementing States, provided they meet the necessary conditions,”.

The time period for which refunds can be claimed is one calendar year like, at this time as on April 1, 2019, FTA is accepting refund applications for the calendar year 2018.

However, in subsequent calendar years, the opening date for refund applications submission will be March 1 of the following year which interprets that acceptance o the refund applications will be commenced on March 1, 2020, for the period from January 1 to December 31, 2019.

Who can claim a VAT refund as business visitors?

The scheme states the following conditions under which foreign businesses will be eligible to recover VAT incurred in the UAE :

  • Foreign businesses must not have any place of establishment / fixed establishment in the UAE or any of the GCC states that implement VAT
  • They must be registered as an establishment with recognized authority in the jurisdiction in which they are settled
  • They must not be registered or a tax chargeable person in the UAE
  • They must be from a VAT implementing country which equally provides VAT refunds for UAE companies under similar circumstances

The UAE’s Federal Tax Authority (FTA) also clarified that businesses established in any of other GCC states are still eligible to submit a VAT refund application.

Who are not eligible to claim VAT refund as a business visitor?

It outlined three circumstances under which VAT cannot be reclaimed –

The first is if the foreign business is involved in making supplies to the UAE (except that the recipient is certified to account for VAT under the reverse charge system).

Secondly, if the input tax in terms of any goods or services is non-recoverable as per VAT legislation. Hence, not recoverable by a taxpayer in the UAE.

The third is if the foreign business is a non-resident tour operator.

The UAE implemented 5 % VAT on the supply of most goods and services in the country on January 1, 2018.

VAT Refund Scheme for Foreign Business Visitors in UAE

Petrol and Diesel price increased in UAE for April 2019

Petrol and Diesel price increased in UAE for April 2019

The UAE Ministry of Energy and Industry have announced the new fewel prices in the country for the month of April 2019. The price hike is nothing new as a gradual increase in the petrol and diesel prices sometimes is not felt hard and affects directly to the people’s budget and pocket but considering as a whole, it matters when we have to fulfil the other necessities of life also along with just the travel part.

It is on Thursday that the UAE got the fuel prices revised for the April month. The UAE fuel price for April 2019 has been announced by the Ministry of Energy and Industry.

The fuel price would be including the Value-added tax (VAT). The price hike would largely affect the Drivers for whom petrol is an everyday affair as the price is increasing significantly in the month of April.

The VAT would also be charged with the fuel and would be charged at 5 percent. So the matter is to make haste if one is planning to get the pump filled!

The charges for the different quality of petrol and diesel which have experienced hike are as follows

Petrol price in UAE per litre:

  • The drivers have to pay Dhs2.23 per litre for Super 98 which was Dhs2.04 in March
  • Special 95 would be costing Dhs2.11 per litre experiencing an increase of 19 fils from Dhs1.92 last month
  • The diesel would be priced at Dhs2.49 per litre for April which is an increase of 8 fils, which was Dh2.41 in March. Thus the revised price for diesel is Dh2.49 a litre.Thus we see that diesel would this month be more expensive from what it was in March.

Looking back, the UAE’s Ministry of Energy took the initial step to get the fuel price settled, based on the average global prices in August 2015.

Before this, the petrol price in UAE has been subsidised by the government, which prevented the consumers from the effect of the global fluctuations in the cost of petrol.

SUPER 98 PRICES SO FAR FOR 2019:

  • January: Dhs2
  • February: Dhs1.95
  • March: Dhs2.04
  • April: Dhs2.23

VAT Refunds For Business Visitors Scheme To Launch From April 2 in UAE

VAT Refunds For Business Visitors Scheme To Launch From April 2 in UAE

The FTA is all set to launch the “VAT refunds for business visitors scheme” from 2 April 2019.

Sheikh Hamdan bin Rashid Al Maktoum, Deputy Ruler of Dubai, the UAE Minister of Finance and FTA Chairman, the tax authority chaired the meeting of FTA Board of Directors and said that the foreign businesses can apply to get the taxes imposed during the import and export activities of the people who do not live in the UAE but belongs to the countries which implement VAT refund schemes.

The FTA in a statement said, “The scheme aims to reciprocate the efforts made in countries that offer VAT refunds to visiting UAE businesses”.

Conditions to Avail VAT refund

There are four conditions to be eligible for the VAT refund. They are-

  • Foreign businesses should not have the place of establishment or fixed establishment in UAE or any VAT-applicable GCC states.
  • Such foreign businesses should not be taxable in the UAE.
  • The foreign businesses should be registered with a competent authority in a jurisdiction as an establishment in which they are established
  • The foreign businesses must belong from the country which implements VAT and that equally gives VAT refunds to UAE businesses in the same situation.

Sheikh Hamdan said that the “FTA has made plans to encourage the tax compliance and to increase the registration rate among taxable businesses, and combat tax evasion”.

Sheikh Hamdan also said “The authority is also stepping up its efforts to businesses – who we consider to be strategic partners – fully comply with tax regulations and procedures with little to no effect on their activities. With that in mind, we regularly organise awareness and consultative meetings to help private-sector entities across all industries efficiently implement the tax system”.

He also said that the FTA is currently working on a new campaign, especially ‘Your Tax Invoice: Your Rights’, which was launched to promote the use of Tax Invoices in all business activities during the first quarter of this year. Hamdan added “This initiative is in conjunction with the Tax Clinic, which was launched in August 2018, and seeks to establish direct communication with businesses, continuing throughout all seven emirates to raise awareness and to flag obstacles that can be resolved immediately”.

The FTA said “The level of tax compliance in the country has increased, with the number of registrants for VAT exceeding 300,000 registered businesses – tax groups and individuals. Meanwhile, the number of registrants for Excise Tax reached 719, and the number of approved Tax Agents increased to 316”.

The FTA said that the “VAT refund procedures for UAE nationals who are building new residences” is running successfully. By this method, many citizens are getting benefits as it is a simple and straightforward electronic process which allows them to claim the refund on the taxes levied on the construction of the houses. The FTA also said that 235 applications have been approved to allow the citizens to recover Dh9.76 million in total.

The board also gave a green signal to the plan of FTA to launch the second stage of the “Marking Tobacco and Tobacco Products Scheme” by which the tobacco products will be expanded which are imported or locally produced and traded, including shisha.

VAT Refunds For Business Visitors Scheme To Launch From April 2 in UAE

Close to 300,000 Business have Registered for VAT in the UAE: FTA Said

Close to 300,000 Business have Registered for VAT in the UAE

According to the Federal Tax Authority (FTA), close to 300,000 business have recently registered for VAT in the UAE region.

At one of the meetings headed by Sheikh Hamdan bin Rashid Al Maktoum, also serving as the Deputy Ruler of Dubai, it was announced that the number of registered tax agents operating in the UAE has increased to 316.

This has also highlighted the success of the recent VAT refund procedures made in UAE for the Emiratis building new homes. Approximately, 235 applications have been approved by the government enabling citizens to recover a total of AED 9.65 million.

Praising the positive results at the meeting, Sheikh Hamdan stated: “The Federal Tax Authority has developed comprehensive plans to encourage tax compliance, raise the registration rate among taxable businesses, and combat tax evasion.”

Meanwhile, FTA has also disclosed that the Tax Refunds for Tourists Scheme that was started last year in November has also recorded close to 6,000 refund transactions per day.

FTA has also announced that they have completed the early preparations and activities that are required for the launch of VAT Refunds under the Business Visitors scheme starting from April 2, 2019.

The preceding scheme would also allow foreign businesses to apply for a refund on taxes that are levied on the import/export activities to anyone, who is residing outside UAE, but is a part of country that mandate VAT refund schemes.

How To Manage Your End-of-year Input Tax Adjustments For VAT in UAE?

How To Manage Your End-of-year Input Tax Adjustments For VAT in UAE?

As the VAT (Value Added Tax) system in the UAE completes its first year, many businesses are engaged in analysing their tax liabilities and especially adjusting their end-of-year input tax dues, if any. Input tax recovery is generally made by partial exempt taxpayers who claim input tax for the supplies which are exempted.

Such taxpayers need to review their input tax records and the amount recovered over the last year to detect any mistakes and miscalculations.

The aim of annual input tax adjustment is to find and correct any fluctuations in the input tax recovery which has already been made during that particular tax year.

Here are a few tips and procedure to help you easily process your end-of-year input VAT adjustments.

Know your tax liability and period

The tax year is not always the same as the calendar year. For a taxpayer who files quarterly VAT returns, the tax year ends as per the following criteria.

  • If your tax period is ending on 31 January/April/July/October, the tax year will end on 31 January.
  • If your tax period is ending on the last day of February/May/August/November, the tax year will end on the last day of February.
  • If your tax period is ending on 31 March/June/September/December, the tax year will end on 31 March.

However, if you file monthly VAT returns, your tax year ends with the last day of the calendar year, i.e. 31 December.

You should calculate the end-of-year input tax adjustments and file the same in the first tax period of the following tax year. For instance, if the tax year is ending on 31 March for you, you should file adjustments in the June tax return.

How to know your end-of-year input tax adjustments?

Taxpayers who are eligible for input tax recovery against exempt or non-economic supplies must calculate their input tax amount/eligibility for each tax period.

This is how it can be done:

First of all, the taxpayer needs to filter out the expenses which were made on the tax-exempted supplies. Then, he/she needs to calculate the input tax which is to be incurred on the particular supply. Second, the taxpayer needs to calculate the input tax which is not attributed to any particular supply.

The same calculation must be repeated by the taxpayers at the end of each tax year in order to calculate and make input tax adjustments.

Actual use adjustment

Now that you have calculated the annual input tax recovery following the standard method explained above, you may now need to make the adjustment in the recovered input tax based on the actual use.

In the actual use adjustment, the availability of input tax is determined on the basis of the type of expenses on which the tax was recovered and the supplies for which these expenses were made in the first place.

The actual use adjustment is required to be carried out in case if the difference between the input tax calculation via these two methods (standard and actual use) is more than AED 250,000.

Capital Asset Scheme

Capital Asset scheme is a special scheme under UAE VAT designed to govern the input VAT recovery on large value capital assets which have long-term usage. Any assets or expenses with a value over AED 5 million (excluding VAT) and having a life of more than 5 years (10 years in case of buildings) qualify for the Capital Asset Scheme.

A taxpayer must confirm whether any of the expenses incurred by them on assets quality under this scheme. If so, they need to verify and adjust the amount of input tax recovered during the tax year against the use of the capital asset.

VAT in UAE: No VAT on Bank Deposit Interests And Dividends

VAT on Bank Deposit Interests And Dividends

The UAE’s Federal Tax Authority (FTA) expounded that income earned through Bank interest and Dividends are outside the scope of VAT in the UAE. These are passively earned interest income sourced from bank deposits/dividends and are not subject to value-added tax (VAT) in the country. So, there is no obligation to report them in the VAT return.

“VAT is imposed on the import and supply of goods and services at each stage of production and distribution, therefore, VAT implications arise only when there is a supply – if there is no supply, there is no VAT implication,” the FTA explained.

To understand more clearly let us take an example of a retail business which saves its income into a bank account to yield interest on the deposited amount then the interest earned is the income which arise from solely depositing the money in the account, & the income earned in the form of interest is earned passively because the businessmen put no efforts to earn this income.

For this, the retail business did not make a supply to the bank, and the interest income gained is not a consideration for a supply. It is simply a financial service as stated by VAT law.

“The UAE tax system stands out for its transparency and accuracy in all its procedures; it strives to establish a conducive environment, setting up all the necessary infrastructure and legislation to conduct business efficiently and effectively and ensure its growth across all sectors. This includes the banking and finance sector, which enjoys high confidence both locally and internationally while maintaining steady growth and contributing to economic development,” said Khalid Ali Al Bustani, director-general, Federal Tax Authority.

Under the VAT law, the payment or collection of any amount of interest and dividend is defined to be a financial service and is therefore exempt from VAT.

The rules under the VAT law implies:

  • Income derived in the form of interest from the bank is not deemed as supply and not accountable for VAT.
  • The interest gained from extending loans or credit are exempt supplies for VAT purposes and does not hold any such bearings.

On January 1, 2018, FTA fixed 5% VAT to be charged on the supply of other Goods and Services, and within the first year of implementation of VAT in the UAE, FTA witnessed a total of 296,000 business registration for VAT

The FTA foresees a “significant leap forward for the UAE tax system”, in 2019 and look forward to, further improvement in tax compliance rates, more registration among taxable businesses, and completely brush off the tax evasion.