UAE Cabinet approves VAT refund for tourists

Tourists visiting the UAE will be provided with a refund system for value-added tax (VAT), it was announced on Wednesday.

The UAE Cabinet has adopted a decision to implement the new system, which will be integrated between retail outlets with tax refund points, official news agency WAM reported.

“The system will be implemented from the fourth quarter of 2018 in cooperation with an international specialised company in tax recovery services,” a statement said.

Non-residents can refund VAT on purchases made at participating retailers, provided that such goods are not exempt from the tax system.

The move is aimed at boosting the growth of the UAE’s tourism sector.

The number of passengers going through the UAE’s airports reached 123 million passengers in 2017, and the total contribution of the tourism sector to the country’s GDP reached 11.3 per cent last year to reach Dhs154.1bn, the report added.

VAT, charged at a rate of 5 per cent,  came into force in the UAE on January 1 and applies to most goods and services.

Read: Revealed: Goods and services subject to VAT in the UAE

However, the UAE government has recently opted to refund VAT to a number of businesses including those in the events and conference markets and wholesale traders of gold, jewellery and precious metals.

Read: UAE to refund VAT for conferences, events companies

In May, an International Monetary Fund (IMF) official told Reuters that the implementation of the tax had gone smoothly and its impact on inflation was expected to ease.

Natalia Tamirisa, who heads the IMF mission to the UAE, said inflation is expected to average 3.5 per cent this year, up from 2 per cent last year, but will ultimately settle around 2.5 per cent.

She said the new tax was expected to lift revenues by 1.5 per cent of gross domestic product in the long run.

Read: IMF says UAE’s VAT introduction has gone well, impact short-lived

Negative impact of VAT on UAE, Saudi only short-term – PwC