Conditions to Allow Foreign Businesses to Refund 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 the succeeding year, the opening date for accepting the 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 a 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”.

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