VAT Refund
VAT REFUND
Value-Added Tax or VAT is an indirect tax imposed on the supply of most goods and services, charged at each step of the supply chain and paid by the end-consumer. Governments take this amount from businesses to be used as a new source of the country’s income to provide high-quality public services. Tourists and visitors of the UAE will pay value-added tax (VAT) on their purchases during their stay in the country, however, they can refund it upon leaving the country through a fully integrated electronic system, connecting all ports of entry and exit from the UAE with all retailers registered in the Tax Refund for Tourists Scheme.
When the input tax is greater than output tax on a VAT return, the Taxable Person is able to request for a VAT refund. The same can be initiated through VAT 311 form available in FTA portal. The tax registrants can initiate the refund request either at the time of filing the VAT return or after submission of VAT returns.
VAT refund form UAE
- TRN (Tax Registration Number): This field is pre-populated based on the information in the taxpayer’s account in the User Profile tab. It’s advisable to verify if the correct TRN is listed.
- Total amount of Excess Refundable Tax (in AED): This field is pre-populated based on the formula, Refunds – Penalties = Excess Refundable Tax. This includes refunds reported in all previously submitted VAT returns, and all administration penalties due except for the late registration penalty.
- The amount you wish to have refunded (in AED): The amount you enter must be equal to or less than the amount displayed in the Total amount of Excess Refundable Tax field.
- Remaining amount of eligible Excess Refundable Tax: This field is pre-populated with the amount of refundable tax that you can apply for in the future.
- Late registration penalty amount (in AED): This field is pre-populated based on the penalties imposed on you and whether you have settled the penalty amount or not:
- If you’re free from VAT fines and penalties, then the field will display Zero (AED).
- If you have been charged a VAT penalty, which you have paid, then the field will display Zero (AED).
- If you have been charged a VAT penalty, but you’re yet to pay the amount at the time of claiming this refund, then the field will display the penalty amount. If the refund amount is negative after deducting the penalty amount, your application will be automatically rejected after submission. If the refund amount is positive after deducting the penalty amount, only the balance will be submitted to the FTA for refund claim purposes.
- Authorized Signatory and Declaration: The authorized signatory is pre-populated by the system in both English and Arabic. Make sure you read the declaration thoroughly before ticking Yes to submit the form.
Need for VAT Refund
Tourist purchase of goods are considered deemed exports that will be consumed outside the country and thus they qualify for VAT exceptions. However, most countries including the UAE do not offer VAT refund on services purchased and consumed within the UAE such as hotel stays, restaurant bills, healthcare services that may be subject to VAT.
At 5 per cent tax rate, the VAT refund might look negligible, especially for those who are fussy about looking around for VAT exempted shops, collecting the bills and applying for refunds.
VAT refunds on small purchases certainly are meagre and may not be worth the trouble. However, the UAE being a major global destination for luxury shopping, the tax savings could become very significant in the context of price of goods purchased. Tourists can claim the refund through approved channels. Tax savings always need not come from a single large purchase, the tax accumulation of one’s purchase of goods throughout the stay in the UAE can become a big sum and worth a refund.
What are the Conditions to Claim VAT Refunds in UAE for Tourists?
There are some conditions for tourists or visitors of the UAE to claim their VAT refunds upon country departure:
- Retailers should be registered in the Tax Refund for Tourists Scheme.
- Goods shouldn’t be excluded from the Refund Scheme of the FTA.
- Tourists or visitors must leave the UAE in 90 days after making the purchase.
- Tourists or visitors must export the goods out of the UAE 3 months after making the purchase.
- The process of purchase and export of goods must be carried out according to the requirements, and procedures determined by the Federal Tax Authority.
Documents are Required for VAT REFUND
VAT-implementing countries follow tax refund schemes for goods purchased by tourists from approved tax-exempted stores that are registered with the tax authorities
- VAT refund application form (Microsoft Excel format).
- 5 highest tax invoices from Standard Rated Expenses (in term of values).
- 5 highest official and commercial documents related to zero rated supplies (in term of values)
- 5 highest tax invoices related to Sales and other and outputs (in term of values).
- IBAN Validation Letter.
Timeframe for VAT Refund
Where the Taxable Person makes a claim for a refund of excess refundable tax, the Federal Tax Authority will review the same within 20 business days and notify the Taxable Person of its decision to accept or reject the refund claim. The Federal Tax Authority may notify the applicant that it requires a longer period than (20) business days to consider the application where appropriate. Once the VAT refund claim is approved, the amount will be refunded within 5 business days.
UAE’s Current VAT Rates
- Standard (5%) – The vast majority of goods and services are subjected to the standard VAT rate.
- Zero (0%) – Zero-rated supplies include education and healthcare services, certain precious metals, international transportation, and exported goods.
While you’ll have to pay the standard VAT rate on most goods and services in the UAE, you may be able to claim a VAT refund if your business is not registered in the country. Before you can receive your VAT refund, UAE officials will have to review your application form. If all the information is correct, you’ll receive your refund within four months.
Who are not eligible to claim Tax Refund as per UAE VAT?
A foreign tour operator is not eligible to claim Tax Refund under the business VAT refund scheme.
Hence, the business VAT refund scheme is an attractive scheme for foreign businesses visiting UAE. While the framework of the VAT refund scheme has been laid down, this is not rolled out yet. As a result, the details of the exact process for claiming refund under this scheme are not available yet, and will be made available at a later date.
Frequently Asked Questions
Non-resident tourists aged 18 or above, who have a valid passport with entry and exit stamps showing their status as tourists, are eligible to claim a VAT refund.
Only purchases made from retailers registered in the UAE’s Tax Refund for Tourists Scheme are eligible. Look for the “Tax-Free” shopping logo displayed by participating retailers.
No. There is no limit specified by the Authority to make the refund request. Hence, tax registrants can apply for the refund at any point of time till there is a credit owed to them.
Yes. The extra payments can be refunded by providing the relevant supporting documents to the authority.
The tax registrants can apply for the refund at any point of time till there is a credit owed to them.
Depending on the complexity of your application and the capacity at the VAT authority, it can take up to 6 months for EU businesses and up to 6 months for Non-EU businesses to receive a VAT refund from United Arab Emirates
Yes. FTA has the right to reject the refund request if you did not comply with the below:
- No response to additional requirements (if any) within 5 working days.
- Incorrect attachments.
- Unmatched summary with related VAT returns filed by the applicant.
The FTA will inform you that any refund claim that you make has been approved or rejected within 20 working days. However, where necessary, the FTA may inform you that consideration of the claim will take longer than that.