Tourist Refund Scheme Phase 2 Rollout From Dec 16

Tourist-Refund-scheme-phase-2

According to an announcement by the Federal Tax Authority (FTA), all preparations for the launch of the 2nd phase of the VAT refund scheme for Tourists have been completed and the scheme will of officially launched on Sunday, December 16. Starting from this date, tourists in the UAE would be able to claim a refund of the VAT paid by them on the purchases made from 12 air, land and sea ports covered under the scheme.

The first phase of Tourist VAT refund scheme was introduced on November 18, 2018, under which purchases made at the Abu Dhabi, Dubai and Sharjah airports were covered.

The following ports will be covered under Phase 2:

3 Airports – Al Ain International Airport, Al Maktoum International Airport and Ras Al Khaimah International Airport
2 sea ports – Zayed Port in Abu Dhabi and Port Rashid in Dubai
4 land ports: Al Ghuwaifat Border Post in Abu Dhabi, Hili Border Port and Al Madheef Border Crossing in Al Ain, and Dubai’s Hatta Border Exit

Recommended: VAT Refund Process for New Residences Announced by FTA

The refund scheme for tourists visiting the country is already in effect, with over 3,800 daily refund requests being processed as of now. Al Bustani, director-general of FTA, indicated that he aims to grow daily VAT refunds more in the coming period. “The FTA coordinated with the system operator Planet, running all necessary experiments to ensure the scheme is implemented smoothly and accurately,” he said.

The FTA said that retail stores that are registered in the system under the refund scheme must provide tax invoices for such eligible transactions. These stores can be distinguished by placing ‘tax-free’ sign on their outlets to let the customers know that they are registered for the scheme.

Recommended: VAT Refund Scheme for Businesses in UAE

Earlier, at the time of the launch of the VAT refund scheme for tourists, the FTA had also released a list of conditions for tourists to be eligible to apply for VAT refunds. A buyer must be 18 years or above, a foreigner and must have purchased the said goods on UAE soil and paid VAT on the same with the intention to take the goods outside of the country within 90 days from the purchase date.

UAE Government Executes A New VAT Relief Scheme For Charities

charities vat compensation scheme

The UAE Government has made the announcement of a new tax relief scheme for charities who want to compensate for the VAT expenses they have incurred on donations and charities under the VAT reform. The step has been taken to ensure that charities have to pay less VAT and can keep most of the amount raised by them through fundraising and other charitable acts.

A good news for the charitable institutions or non- profit organizations is that now that they can claim for the compensation under the VAT reform which is set to be commenced in the New Year.

Under the new tax relief scheme, €5 million will be released for refunds to various charities who pay VAT on fundraising. The charities who apply for the compensation have to pay less tax which will result in more money incurred by charities through fundraising for good causes.

Read Also: Three UAE Free Zones List Of VAT Exempted Areas

Under the charities vat compensation scheme, the charitable institutions are liable to apply for the compensation paid for one year in advance, that means the charities, who have incurred the VAT costs in the whole year of 2018, are also allowed.

Michael McGrath, the party’s finance spokesperson said that the scheme has been pending for long period of time and now finally introduced by the UAE government. According to Mr McGrath, “It is a really important step forward and a breakthrough that has been long sought by the charitable sector because the reality is that a lot of the money that they raise through fundraising, by volunteers is ultimately paid to the Exchequer by way of VAT when they expand their services and invest in facilities.”

“I am advised that the Revenue Commissioners have developed systems to enable charities submit claims and to support processing and payment of claims. The facility to make claims under the scheme will be available on ROS from January 2019,” he added.

VAT Penalties: How to Avoid Penalties Under VAT in UAE?

avoid-vat-panelties

It is vital for the CEO of business to know and obey the new rules and regulations of VAT to avoid hard penalties which might be as higher as AED 50,000.

Here are the seven steps by which fiscal penalties can be avoided, which is caused due to violations, errors or incorrect record-keeping:

VAT Registration

VAT registration in UAE is important for the company which offers taxable goods or services with a yearly revenue of AED 367,000 or above. Option of registration will also be given to those whose yearly revenue is between AED 200,000 and AED 367,000. The Federal Tax Authority said that if the businesses fails to register in the given time then it could result in non-compliance penalties which can be as drastic as AED 20,000. The unregistered companies cannot do sales until they get their tax registration certificate (TRC).

Record all transactions

The requirement of the law is that, the businesses must stand up to their expectations and must have minimum turnover (as shown through fiscal records) to record their costs, business income and other similar VAT charges, and be sure to keep all the records up to date so that these records can be submitted to the FTA in Arabic.

The businesses which does not meet the minimum yearly turnover are advised to at least maintain the records of all the transactions. Whether your company is registered to VAT or not, the final decision will be taken as per the record which you have maintained and it will be the evidence for the FTA which will come for the survey. Or else, it may be considered as non-compliance, which will lead to the penalty.

Recommended: VAT Penalty in UAE

Collect VAT

On goods and services purchased by the customers, VAT is collected by the businesses on behalf of the government. If in any case, businesses fails to collect VAT, then they have to pay five times the VAT levied applicable on the company and must be paid within the time frame given by the tax authorities. So therefore it is suggested to follow the VAT collection compliance as per the tax authorities.

File VAT return

If you business has yearly turnover more than AED 150 million, then VAT returns must be filed every month and if the revenue is less than AED 150 million then they must pay file VAT quarterly. Penalties will given to those businesses which fails to file the tax return at the given time.

Understand zero rates and exempt suppliers

Some businesses have been excluded by FTA from tax. VAT taxable is still applicable to the zero-rated supplier but with the zero-percent rate. So, it is important for the companies to record and report on all the supplies. Real estate developers, airlines, clinics, jewellery, hospitals and schools are included in such industries.

Reverse Charges

The amount of VAT which is paid on goods and services, if purchased in the UAE is Reverse charges. These charges will be applicable on the goods and services which will be imported from outside the GCC. Under the Reverse Charge Mechanism, the business will not pay the VAT, but is shifted from seller to buyer. In this case, the buyer will inform about their input VAT (on the goods purchased) including their normal output VAT (on sale) in their returns for that quarter.

Get the basics right

Within 14 days of date of supply, a tax invoice must be issued. For tax invoice, it is compulsory registrant to include name, address and Tax Registration Number (TRN) to make the supply. An invoice must have the date of issue and a unique number due to which it easy to identify the tax voice and invoice in any order. And it is compulsory for it to precisely state the unit price, the quantity or volume supplied, the rate of tax and the amount payable which must be mentioned in UAE dirham.

From experience, we know that in other mature VAT jurisdictions, businesses have problem to answer the questions raised during audit by tax authorities. This problem is due to the incomplete submission of documents that support liabilities and claims reported within the VAT returns. As VAT is transactional in nature, then it will be advisable for businesses applying the tax to set in place an union of automated processes and tools that can effectively produce an audit file, on the request of tax authorities.

Federal Tax Authority UAE Begins New Digital Tax System for Tobacco Product in 2019

FTA UAE Begins New Digital Tax System

To collect taxes and combat tax avoidance, the Federal Tax Authority (FTA) is ready to launch a tax control system in UAE for tobacco products as per the Decision No. (42) of 2018. To roll out the single integrated set, the scheme is ready to be implemented in alliance with the applicable authority, which guarantees the protection of rights and responsibilities of a taxable person and also to ensure the procedures that will balance their relationship with the authority.

Penalties

The Federal Tax Authority (FTA) told that penalties will be imposed on:

  • Tobacco suppliers must obey the new scheme to avoid the administrative penalties which will be into effect at the starting of 2019, which also includes a ban on disobedient businesses and they cannot do any commercial activity until they obey the system fully.
  • Violation of the procedures which include the fines imposed on a person who own tax goods that does not carry any digital stamp, or who allows the use of their facilities to sell the products.
  • The person who prints on these goods, or interfere with the stamps placed on them.
  • Those who fails to declare the transfer of tax goods
  • The person who fails to obey the safe-storage requirements for the stamps.
  • The person who accepts unofficial trading, exchange, sale or supply of stamps
  • The person who reused the previously used stamp.

Recommended: 100% tax To be Levied on energy drinks and tobacco in UAE

Why a Digital Tax Stamp?

FTA Director General His Excellency Khalid Ali Al Bustani said: “Cabinet Decision No. (42) of 2018 On Marking Tobacco and Tobacco Products complements the UAE’s tax legislation infrastructure, which is one of the most advanced in the world. It was developed following extensive studies and offers simple procedures to help businesses comply with tax obligations.”

FTA explained that the Cabinet decision defined the procedure to be followed to apply the stamps on tobacco products and specify that the required tax has indeed been paid. On specific products and exact position determined by the authority, the stamp must be applied which was also authorised to determine cases where stamps are not required. Stamps must be placed onto tax goods (after packaging) at the facility where they are produced (if manufactured in the UAE), or importing them to foreign countries, the decision specified.

Placement and Supply of Stamp

The shape of the stamp can be determined by the authority, as per the cabinet decision and the condition for applying it, which includes determining the cases where no stamps is required, the method of placing the stamp and its location on the tax good in question.

To purchase the stamp, the decision need the importer or local producer to issue an order according to procedures surrounding the supply of the stamp which is predefined by the authority; which indicates that the accepted supplier must supply the stamps to the importer or local producer, according with the procedures agreed between the approved supplier and the FTA. These stamps cannot be traded, exchanged, sold or supplied by any other individual; To supply the stamps directly to the particular producer of tax goods, which may also include foreign producers, requested by the importers across the UAE about approved supplier.

Read More: FTA Approves VAT Refund Scheme for Tourists in UAE

Due taxes are set on the stamp by FTA, which must be paid by the supplier before stamps are issued.

The decision of the Cabinet specified the procedure for identifying and tracking the origin of specific tax goods (tobacco and tobacco products), which indicates that local producers/importers/persons who are designated in the supply chain have to keep the records of the transfer of all the tax goods ro and within the UAE during the period in which they are in control of these goods. This includes (but is not limited to) entry of said tax goods into the control of the local producer/importer/ Person designated in the supply chain, as well as the measured transfer of these goods within the UAE, until they exit the control of said local producer/ importer/person designated in the supply chain.

Any person who is dealing with the questions of tax goods and who is required by the FTA to document the movement of these goods is known as the “designated person.”

All local producers/importers/Persons designated in the supply chain must register and declare the tax goods they sell, store, transfer, buy, or process. Meanwhile, customs agencies are tasked with verifying stamps on tax goods entering the UAE.

UAE Introduces Tourist Refund Scheme on Goods Purchased

FTA Approves VAT Refund Scheme for Tourists in UAE

UAE has over the last decade gained widespread recognition as one of the most popular tourist hubs in the world. Its city of Dubai is every shopper’s delight and on top of every global tourist’s list.

And there is more good news for shopaholics as the Arab Emirates is on its course to set all limits and restrictions on tourists’ VAT refund to zero. Reportedly, the UAE had introduced VAT on January 1, 2018. The provision for limitless tourist vat refund UAE has come into effect from Sunday, November 18.

Planet, an International payment service provider, will be a global operator of the refund system. on behalf of UAE’s Federal Tax Authority (FTA).

What is the tourist refund scheme?

The tourist refund scheme is a part of VAT reform in the UAE under which the ‘overseas tourist’ is allowed to claim a refund of the VAT paid by them on the purchases they incurred during the visit of UAE. Any type of taxes or (VAT) born by ‘overseas tourists’ on purchases made in UAE, a refund will be provided to them.

Who is an ‘overseas tourist’?

Here, an overseas tourist means an individual who is not the citizen of any of the GCC VAT implementing State as well as who is not a crew member of flight or aircraft any of the GCC country in implementing State. So, tourists from a GCC country.

Here are a few highlights of the UAE VAT refund scheme for tourists:

  • Tourist will get 85% of the total VAT claims. The remaining 15% will go to Planet as administration fees.
  • For cash related refunds, the VAT UAE Tourists will be allowed Dh10,000 in cash. Post this, part of the remaining refunds will be transferred electronically to tourists.
  • The remaining amount will be transferred to a bank account, debit or credit cards.
  • 4500 companies have so far registered under the UAE VAT refund scheme. Planet expects this number to shoot up to 6000 by end of this year and reach 10,000 by early next year.

Out of the total companies registered under the scheme, most are from electronics, gold traders, general traders, souks.

The Malls and Retail Groups

As part of the preparation, the UAE government has already engaged at levels to bring malls, retail groups, and others on board. All malls and retail groups have agreed for a refund. Most of the VAT refunds will in all likelihood be made on gold jewellery, electronics, and luxury goods.

Note that Minimum retail purchase liable for VAT refund claims is Dh250

For VAT claim Eligibility retailers must:

  • Comply with credit check and timely settle all tax payments
  • Submit VAT returns corresponding the claims.

Terms and Conditions

For claiming VAT refunds in the UAE, tourists have to fulfill all the conditions that are mentioned below:

  • Tourist is Entitled to Purchase Goods from a retailer who has been registered in the Tax Refund for Tourists Scheme(PDF)
  • Goods Purchased must not be exempted from the Refund Scheme of the Federal Tax Authority
  • Tourists have to export the purchase goods out from the UAE within three months from the date of supply
  • The tourist must have an explicit intention to leave UAE in 90 days from the date of supply, along with the purchased supplies
  • Tourist is entitled to follow the requirements and procedure of the Federal Tax Authority while purchasing and exporting the goods.

The Impact of Refund Scheme

UAE enjoys global repute as a shopping destination and the VAT refund Scheme will further strengthen this scheme. The scheme covers many if not all goods sought by tourists. This will boost sales and keep the tourists a little longer than usual on the UAE soil. This will UAE doors welcome for tourists. Inbound tourism to Dubai and the UAE is expected to shoot up by fractions due to the foresightedness of the government officials.

The FTA declare UAE’s Federal Tax Authority has appointed Planet as its exclusive tax refund operator for the Tourist Refund Scheme which will be rolled out in November 2018.

The decision was taken during the fifth meeting of the FTA which was held this Wednesday. The authority also said that the number of VAT registered businesses has increased to 281,00 while stats for excise tax registration stand at 637, as per latest data. Read More

Simplified VAT Refund Process Rolled Out For UAE Nationals

Simplified VAT Refund Process Rolled Out For UAE Nationals

The refund of Value Added Tax (VAT), for UAE nationals who are building new residences, have been clarified with electronic procedures, announced by Khalid Ali Al Bustani, the Director- General of the Federal Federal Tax Authority (FTA) on 16th October 2018.

Through a press release, the announcement was declared in which the update was given about the VAT refund process for Emirates building new residences. Al Bustani said, “The happiness of UAE citizens is the top priority for the Federal Tax Authority. We are committed to implementing our services through the most advanced, innovative, and easy-to-use digital systems.”

Special care has been taken for not raising the burden on the UAE’s citizens and residents said the UAE legislator. The primary rate of VAT as supply in the real estate (sale or rent) industry is 5 per cent, excluding the first three years of construction is subject to zero-rated VAT.

Specific benchmark and documents have been recognised by the authority that must be attached to petition to claim VAT, said Al Bustani, and to make sure that the VAT recovery is given to the citizen who meets the conditions.

Three key conditions have been noted by the authority about the refund procedure, which can be completed on the FTA website:

  • Only Emirati National applicants can apply
  • Only the applicant and/or their family can use the residential unit
  • The VAT refund will only include the money spent on units of the residence, such as amount paid for building materials.

Read Also: Federal Tax Authority Clears up VAT on Compensation Payment

The FTA stated that four simple electronic steps carry recovery request procedure, including:

  • First, From the FTA website, the VAT refund form must be downloaded
  • Second, print out the completed form (as handwritten forms are not accepted), and sign.
  • Third, scan the completed and signed form, along with supporting documents, and then submit them in PDF format to homebuilders@tax.gov.ae within the six-month period following the completion of the construction work. The supporting documents include a copy of the applicant’s passport and Emirates ID, as well as the paperwork proving his/her ownership of the plot of land in question, such as utility bills, which must also include the date of completion.
  • Fourth, the applicant must submit the request as mentioned on its official website.

After submission, an email will be sent to the applicant saying that the authority has received the documents. Within five working days, another email will be sent to inform the applicant whether they are qualified for the refund or not. Those who are eligible for the refund, will have to provide a reference number issued by FTA for the application in question.

“Global tax practices have underscored the importance of extending VAT on goods and services, reducing exemptions and exceptions in the system to preserve tax revenues and prevent tax evasion practices,” Al Bustani said.
“It would be difficult for contractors and construction consultants involved in the procurement process to track what is exempt from the VAT. This is why the authority cannot allow the contractor to determine when the tax is collected, as it could lead to the possibility of tax evasion,” he added.

A VAT refund application is accepted 20 days from the date of receipt of the application and supporting documents, adding five working days more for the delivery of the refund to the successful applicant.