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.

Input Tax Recovery in UAE [Process and Conditions]

A registered dealer is liable to pay input tax on every purchase for further course of business. Input Tax Recovery is a key feature of VAT reform in UAE. Under this, the UAE government has allowed registered persons (taxpayers) that they can recover the input tax paid by them on the purchases to avoid the confusion of double taxation in the supply chain.

It simply means that an individual can lessen the figures of input tax by claiming (recovery) the tax payable on inputs and he has to pay the balance amount of tax. Make sure that that tax is to be payable on each stage of the supply chain as value addition.

So, the amount of input tax recovery in UAE plays a significant role in the cash flow and operating expenses under VAT.

Firstly, let’s understand the process of input tax recovery-

Process of Input Tax Recovery

In Abu Dhabi, Vaah & Co has purchased 10 laptops in February 2018 and the price of per computer is AED 1,000.

In the similar month, Vaah & Co supplies 20 laptops to its customers at a price of AED 2,000. A 5 percent VAT has been imposed on the supplies made by Vaah & Co. on the supply which amounting AED 2,000.

Vaah & Co paid AED 2,000 as output tax for the month of January ’18

Input tax recoverable for the month of February ’18 is AED 500

For calculating the tax payable, we can put the figures in the formula

Tax payable = Output tax payable – Input Tax Recoverable

Hence, tax payable by Vaah & Co. for the month of January, ’18 is AED 2,000 (Output tax payable) – AED 500 (Input tax recoverable) = AED 1,500.

As you can see above, the input tax paid by the company will be reduced from their out tax liability, and they are required to pay only the balance tax to the government. This is how input tax works.

Input Tax Recovery Condition

The VAT paid on while buying the goods and services which are used for business cause and for few conditions can be recovered by a registered business.

The conditions which must be satisfied are-

A. Must Be Used To Make Taxable Supplies

Taxable supplies are the supplies on which the tax is likely to be paid (i.e. supplies made at zero-rated supplies or 5%). Only on the inputs which are used to make taxable supplies can be allowed to claim the Input VAT recovery and not the exempt supplies.

B. Recipient Gets And Keeps The Tax Invoice

The recipient who is claiming the input tax recovery on a supply must confirm that they receive the Tax Invoice involved to the supply and must be kept in the records. The Tax Invoice must show all the details of the supply which is associated with the input tax recovery which is to be claimed.

C. Recipient Pays The Remuneration For The Supply

The receiver who claims input tax recovery must pay or plan to make the payment of remuneration for the supply within a half year (6 months) after the date of supply which has been agreed for the supply.

Recoverable Input Tax

The recoverable input tax is the tax amount that has been paid or return by the Federal Tax Authority particularly to the registered taxpayer under the VAT Reform in UAE

A registered taxpayer can claim for the input tax incurred on purchases goods and services in case of:-

  • Taxable supplies
  • Supplies and Services are to be made within a state
  • Exempted Supplies that have been listed in the VAT Decree-Law must be made within the state

Blocked input tax

VAT refund is not available on the input tax paid on the following types of expenses:

  • Employee-related expenses
  • Entertainment expenses
  • Supplies used to make exempt supplies
  • Vehicles used for personal purposes

Useful Article: 7 Hidden Business Expenses Eligible for Input VAT Recovery

So, the supply for input tax recovery is a very important component of VAT in UAE. Businesses must confirm the identity supplies correctly on which input tax can be retrieved, confirm that they can satisfy the conditions for claiming the input VAT recovery and also claiming it on time.

This will help in the business by confirming the perfect cash flow and working capital. All the works can be made simple by using the VAT software which will automatically perform all these tasks w.r.t. ITC which will give enough time for you to focus on your business.

Declaration Of Input Tax Credit In Vat Return Form 201

Now, a taxpayer needs to provide the following details when filing a claim for the credit of taxes in VAT Return Form 201:

    • VAT registration number
    • ITC balance of VAT as per last return
    • Turnover details
    • Date of return filing
    • Details of pending forms
    • Difference in amount (The rate charged at the time – Actual VAT rate on the supplies)
    • Final eligible ITC on VAT

Tourist Refund Scheme Phase 2 Rollout From Dec 16

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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.

e-Guarantee Cancellation in FTA portal (A Complete Guide)

cancel e-guarantee

The situation of UAE import where an e-guarantee is necessary, are the situations in which the importer is not reliable on the import and if the conditions are not satisfied then the e-guarantee helps as financial security for payment of the VAT due. The submitted e-guarantee earlier will be cancelled if the conditions for cancellation of import VAT are satisfied.

Easy Steps to Cancel e-Guarantee in FTA portal in UAE

Given below is the step by step process to cancel a submitted e-guarantee in the FTA portal

1. Login to FTA portal
2. Click on the ‘VAT’ tab.

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3. Click ‘VAT 701- E-Guarantee Cancellation form’.

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4. Fill up the e-guarantee cancellation form and give all the required information, including the import declaration number, import declaration date and the e-guarantee number.
5. After the filling of form, click on ‘Submit’ button.6. After the submission of the form, a confirmation message will pop-up on the screen, saying that the request is successful and you will also receive a confirmation email on the given email ID.

vat701-cancellation-request

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

For the import in UAE, the non-registrants who import goods in definite specified situations must submit an e-guarantee. After the customs clear the goods and the conditions for cancellation of import VAT are satisfied then the e-guarantee which was submitted earlier can be cancelled by the process which is given above.

e-Guarantee for VAT in UAE [A Complete Guide]

Here we will discuss all the angles through which the unregistered entity is eligible to pay Value Added Tax on the imports via an e-guarantee while having a look on the process and steps to submit e-guarantee on FTA portal:

Context for VAT Payment via e-Guarantee

  1. Shifting of goods from one VAT designated zone to another
  2. Under customs duty suspension, import of goods into UAE. Customs duty suspension is appropriate for fixed identified goods on which the importers have to pay customs duty at a reduced rate or zero customs duty.

Process for VAT Payment on Import

Given below are the processes by which an unregistered person as to pay VAT in UAE in all these cases-

A. Customs Declaration

In the personal Customs portal, the importers must prepare and propose the customs declaration and do the following-

1. Give all the important details about all the goods being imported
2. For processing, submit customs declaration by Customs

After the approval of declaration, it moves to ‘Pending tax payment’ status.

Note: After the Customs declaration is sent to the FTA then there will be no further editing in the form will be done by the customs system. The status of declaration form can be only changed to either ‘Declined’ or ‘Approved’.

B. Obtain e-guarantee (Financial security)

From their bank, the importers must obtain an e-guarantee. The process for this is-

  • From the bank, get an e-guarantee form for a value equal to the value of VAT due
  • For the e-guarantee, get the reference number

C. On FTA portal, create an e-Services account

The person who is not registered must create an e-Services account on the FTA portal to pay VAT on import. The sign-up process is given below-

  • By entering your email id and a unique password, sign-up as a new user
  • At the registered email ID, you will receive a mail to verify your email ID
  • Your e-Service account will be created after you verify the email ID and you can log in to the FTA e-Service portal

D. Login to the FTA portal and complete the VAT import declaration form

The importer must submit the e-guarantee number which was obtained from the bank after the importer login the FTA e-Services portal. for VAT payment, this e-guarantee number must be submitted in the Form VAT 301- Import declaration form. The customs clearance process can be completed after the submission of e-guarantee number is processes.

The process of VAT Payment on import by registered entities is different from the process for unregistered entities. In a few cases, the unregistered importer has to get an e-guarantee from the bank and submit the same in the FTA e-Services portal.

Steps to submit e-guarantee in FTA portal in UAE

The steps for submission of e-guarantee number in the FTA e-Services portal is explained below-

1. Login to FTA e-Services portal
2. As shown below, click on the ‘VAT’ tab

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3. Click ‘VAT 301- Import declaration form for VAT Payment’

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4. After filling the Customs Authority, Declaration Number and Declaration Date, click Next

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5. The screen ‘About Declaration’ will open and the declaration details (Import date, destination, etc.) will be auto-filled. Click Next
6. The screen ‘Declaration Details’ will open and the declaration details [e.g. HS (Harmonised System) Code, Import Value, Customs Duty, CIF (Cost, Insurance and Freight) value, etc.] will auto-filled. Click Next
7. As the scenario of import requires an e-guarantee, the VAT Payment screen will verify the e-guarantee number to proceed. Fill in the e-guarantee number and click ‘Verify e-guarantee’ button

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8. After the submission of the e-Guarantee is processed successfully, then a confirmation message will appear on the screen giving the transaction ID and the amount. Further, an email confirmation will be received that the e-Guarantee has been successfully submitted. After this, the customs clearance process can be completed.

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The FTA made the simple process for submitting an e-guarantee in the FTA portal. The above process must be followed by the entities who have to pay VAT on imports via an e-guarantee in the mentioned scenario.