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.

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