Conditions to Allow Foreign Businesses to Refund VAT in UAE

Conditions to Allow Foreign Businesses to Recover VAT in UAE

The foreign businesses had problems in recovering the VAT (Value Added Tax) in UAE(United Arab Emirates). So to solve this problem, the FTA (Federal Tax Authority) has given some conditions.

Conditions to be eligible for the VAT refund

The FTA gave four conditions that will help the foreign businesses to allow the recovery of VAT in UAE.

  1. The foreign businesses must not have a fixed establishment or a place of establishment in any of the VAT-implementing GCC (Gulf Cooperation Council) states or in the UAE.
  2. The foreign businesses must not pay tax in the UAE.
  3. The Foreign businesses with a capable authority must also be registered as an establishment in the jurisdiction in which the businesses are established.
  4. The Foreign businesses must be from the country which implements VAT and also gives VAT refunds to UAE businesses in the same situations.

Time period for claiming refund

The Authority said that the time period for claiming refund must be a calendar year.

  • To claim the refund of 2018, the refund applications can be made before April 2019.
  • For succeeding year, the opening date for accepting application is March 1, 2020.

Read Also: VAT Refund Scheme for Businesses in UAE

Minimum claim amount of each VAT refund application

The minimum claim amount of each VAT refund application submitted by the foreign visitors is Dh2,000 which might be single or multiple purchases said FTA. The Authority told that the applicants will need the tax invoices to submit it with the refund applications due to which on the purchases for which the applicants wants to reclaim the VAT, they have to hold on to the original tax invoices.

Situations where VAT cannot be reclaimed:

To reclaim the VAT in UAE under this plan, the state might submit the VAT refund application guaranteed FTA, stating the three condition in which the VAT cannot be reclaimed.

  1. In case the receiver of supplies being done by the foreign business, liable under reverse charge mechanism for the VAT.
  2. If the ITC of any goods or services is “blocked” from the recovery, then the VAT cannot be processed further due to which no recoverable can be done by a taxable person in the UAE.
  3. If the foreign business is an non-resident tour operator, then they cannot reclaim the refund.

Khalid Ali Al Bustani, director-general, FTA said “This procedure reflects positively on many sectors, including tourism, trade, exhibitions, conferences, etc. The reciprocity is a key condition for the procedure, whereby the Authority will refund the VAT to businesses resident in countries that refund VAT for UAE businesses visiting their territories”.

Cosmetic Services Prone to 5% VAT in UAE

Cosmetic Services Prone to 5 percent VAT in UAE

The tax experts said that the healthcare services like the cosmetic will now subject to a 5 percent VAT rate.

Most of the healthcare services are classified as zero-rated under the UAE VAT law which means that such services are subject to zero percent VAT. But it allows the VAT recovery on associated costs.

While addressing a seminar on VAT, Nimish Goel, partner at WTS Dhruva Consultants, said “The government has a keen interest and focus on promoting the healthcare industry in the UAE. Keeping this intent in mind, the government has kept basic and preventive healthcare supply at a zero rate of VAT. But there are a lot of activities that are still subject to VAT”.

As per the research reports, the healthcare expenditure is calculated to reach more than $100 billion in the GCC in which the UAE will play a very important role. It is calculated that by 2020, the UAE healthcare will reach Dh 71.56 billion.

Dr Ramadan AlBlooshi, CEO, Dubai Healthcare City Authority – Regulatory (DHCR), said that the VAT was introduced at the beginning of 2018 and after its introduction, the authority got to know about its implementation.

He said “We are keen to provide a platform to help stakeholders have a better understanding of VAT to facilitate compliance in the free zone“.

For the companies which are operating in the healthcare sectors, WTS Dhruva Consultants launched a comprehensive VAT guide at the seminar. The title of the guide is “VAT on Health Care in UAE – Impact and Insights” which gave the information about the issues related to healthcare insurance companies, service providers, and related products.

It is for the first time that someone has prepared a VAT guide for the healthcare sector in the UAE said Dinesh Kanabar, CEO and founder of WTS Dhruva addressing the VAT guide prepared by WTS Dhruva.

He said, “The guide addresses numerous issues related to the activities of healthcare service providers”.

Impact of VAT in UAE [1 Year and Counting]

vat in uae in one year

UAE recently celebrated its first VAT anniversary. The country, known for its rich oil reserves and a booming global tourist hub, had introduced VAT to open up a new source of non-oil revenue for offering efficient and much improved public services, including medical facilities, good roads, transportation facilities, public schools, parks, waste control, and more.

The VAT in UAE was introduced on Jan 1, 2018. More than a year later, tax experts acknowledge the role of FDA (Federal Tax Authority) and UAE public for the successful implementation. Reportedly, the 5 percent VAT was the first of any form of TAX introduced in the Emirates.

The Role of FTA in VAT UAE Success

FTA was at the realm of all VAT related decisions in UAE. Their principle role includes key functions like :

  • Clearing all impending ambiguities (if any).
  • Issuing timely circulars and guides on VAT related provisions.
  • Ensuring compliance from UAE traders, business owners and the public at large.

The UAE VAT rates are one of the lowest in the world right now. VAT UAE provisions mandate VAT registration for all natural and legal UAE person with taxable business supplies exceeding Dh375,000 ($100,000) during the previous 12 months.

In case the total taxable supplies have not exceeded Dh375,000 ($100,000) but expected to cross the threshold within 30 days of the succeeding year, VAT registration must be done.

While registration is key for a robust VAT, filing VAT returns are also equally important. VAT UAE norms mandate large businesses to file monthly returns. Other business can file quarterly returns based on revenues.

FTA must be applauded for ensuring maximum registration and easing compliance burden with timely guides. This ease of process coupled with companies embracing VAT readily by restructuring business processes and systems have made the transition period smooth and frictionless. FA is yet to release tax revenue figures but the recent increment in federal budget spending surely hint towards better days ahead.

The role of FTA is particularly more prominent considering the fact that VAT UAE was in itself the first among any form of tax introduced in the emirates. However, UAE and FTA exempt precious metals such as gold, silver, and platinum as well as sectors such as healthcare, education, and transport from the VAT ambit.

The Tourist VAT Refund Scheme

The VAT Tourist Refund Scheme has now been completely put into place. The first phase was launched on November 18. The second and final phase was introduced on December 16. The achene now facilitates international tourists in UAE to make timely VAT refund claims against purchases made by them on the UAE soil.

Tourists visiting UAE can make claims while leaving the country from any of the following international airports – Dubai, Abu Dhabi, Sharjah, Al Ain International Airport, Al Maktoum International Airport and Ras Al Khaimah International Airport.

In addition to this, tourists can also claim refunds via two ­sea ports – Zayed Port in Abu Dhabi and Port Rashid in Dubai; and four land ports – Al Ghuwaifat Border Post in Abu Dhabi, Hili Border Port and Al Madeef Border Crossing in Al Ain and Dubai’s Hatta Border Exit. Refunds are transferred within 90 days of the claim.

The Projections

The first UAE VAT accrues are projected to touch the Dh12 billion mark in 2018. For 2019, the prediction is a whopping Dh20 billion. Amidst years of the dependence of fledgling crude prices as the primary revenue source, the VAT UAE not only opens new diverse revenue sources but also shows the way ahead for other GSS states and oil producing nations.

The Audits

As the new year slowly sets in, businesses in UAE are gearing up for VAT Audits. The FTA Audits will ensure that businesses stick to fair book-keeping. FTA Audits will be carried out over a period of five working days starting with the day following the particular emails release date.

The Audit periods will include two phases for January 1, 2018-to-April 30, 2018 and May 1, 2018-to-July 31, 2018 tax periods. Businesses must ensure that their expense claims are backed by legitimate and appropriate documents. Last but not least, businesses must also ensure robust book-keeping with timely payment of due tax.

Tourists VAT refund: Processed Totalled 5,000 Applications per Day

UAE VAT Refund Scheme

UAE VAT Refund Scheme for Tourists Sets New Bars for Tourism Industry

The popular review for UAE’s Tax Refunds for Tourists Scheme is out. And global tourists have been pleasantly satisfied with the easy and real-time refund mechanism.

The Federal Tax Authority (FTA) conducted its own inspection which confirmed the growing popularity of the scheme among visitors in one of the world’s most attractive tourist hubs.

Among other things, the FTA ensured that the electronic refund scheme adheres to the criteria and conditions as well as ensure high efficiency and accuracy, in line with current global standards.

Tax Refunds for Tourists

UAE was among one of the 5 GCC countries to introduce VAT (5%) on 1st of January 2018. In a move to keep its tourist appeal intact, it had introduced an electronic system to make VAT Refunds for Tourists visiting and shopping in the Emirates.

The Tax Refunds Scheme for Tourists was rolled out in a two-phase manner. UAE partnered with global systems operator Planet for the first phase implementation of the scheme introduced on November 12.

In it, it has so far covered 12 UAE Ports, 6 Airports, 2 Sea Ports and 4 land Ports. Major beneficiaries of the refund scheme were Asians, Europeans and GCC Nationals.

FTA director-general Ali Al Bustani shared data which cement that the scheme which relies on cutting edge technology is not only customer friendly but flawless too. Since the rollout, an average 5,000 refunds have been processed each day.

At present 7,181 retail outlets are serving tourists via the electronic refund scheme. There is no cap on the maximum cash refundable amount. However, electronic transfer is limited to Dh10,000 per day.

Tourists can recover taxes from tax refund offices set up at one of the 12 air, land, and seaports. All they need to do is submit tax invoices bearing stickers of any one of the 7,181 retail outlets registered in the Tax Refunds for Tourists Scheme.

In addition to this, the tourists need to furnish respective passports and credit cards during refund claims. Identifying the outlets is also easy. Registered outlets will have ‘tax-free’ logo at the display. Further, they properly explain the easy to follow recovery procedures.

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.