What is Tourist Refund Scheme in UAE and How to Claim it?

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.

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

The decision was taken during the fifth meeting of the FTA which was held on25 April 2018. 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.

“In Europe, you can get tax refund only at the airport when leaving the country. In Japan, tourists can get refunds immediately at retail outlets while shopping after submitting certain documents such as the passport or outward travel air ticket copies, etc. In the UAE, it seems it will be a blend of what happens in Europe and Japan,” said Mayank Sawhney, managing director, MaxGrowth Consulting, explaining that .different countries have different tax refund systems in place.

The UAE has enabled specific outlets and money exchanges, most probably at airports and nearby areas, where foreign tourists can go and get a refund of taxes after producing required documents proving their entitlement to claim tourist refunds.

“So these are some of the options the FTA may be considering, because they will not want long queues of tourists at UAE airports waiting to get the refund, given the huge number of tourists who come to UAE every year,” Sawhney said.

In the first phase of implementation, the digital system for VAT Refund was established at Dubai, Abu Dhabi and Sharjah airports. The system will be further expanded to cover all major airports, sea and land ports in the country and fully operational by mid-December. Tourists, who have valid tax invoices issued after November 18,  are able to claim the vat refund now.

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.

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