The Federal Tax Authority (FTA) has published the updated version of the “Guide on VAT Refunds for Business Visitors.” According to the guide, there are specific procedures to be followed by foreign visitors applying for VAT including the timeline for submission of applications and the minimum amount that visitors are allowed to claim.
The guide also stipulated the four major eligibility criteria that a foreign business must satisfy to be able to claim VAT refunds. The criteria are:
- The business must not have a fixed establishment or place of establishment in the UAE or in any of the GCC countries implementing VAT.
- The business must not be of a taxable person in the UAE.
- The business must be registered as an establishment/company in the jurisdiction (country/state) in which it is established.
- The business must be from a country that implements VAT, and such a country must provide VAT refunds to UAE-based businesses in similar circumstances.
Apart from these conditions, a business organization registered in another GCC country that is not Implementing VAT can also be eligible to apply for VAT refund to claim back VAT incurred in the UAE.
A business can only claim a minimum of AED 2,000
comprising of single and multiple purchases.
That said, there are some conditions that can render a business entity ineligible for a VAT refund in the UAE. These conditions include:
- If the foreign business makes supplies in the UAE. In this case, the business cannot apply for VAT return except the recipient is mandated to account for VAT under the reverse charge mechanism.
- If the Input Tax in respect of any goods or services is “blocked” from recovery. In this case, the tax is statutorily deemed irrecoverable by a taxable person in the UAE.
- If the business owner (foreign business) is a non-resident tour operator.
Other factors to take note of are:
- A business can only claim a minimum of AED 2,000 comprising of single and multiple purchases.
- To be considered for a VAT refund, the business must provide the original tax invoice together with the application for a refund.
- The period of each refund claim shall be a calendar year. And refund applications in respect of 2018 calendar year can be made from 1 April 2019, while applications for subsequent calendar years will commence from 1 March of the following year.
The UAE is taking bold steps to create a fair business environment for local businesses and foreign business visitors but the tax system is still at its early stages.
If you have done any business in the UAE in the past year and would like us to help you with the VAT refund application, please do not hesitate to reach out to us.