Tourists will be charged a fee for VAT refund, clarifies UAE’s FTA

The UAE is set to begin implementing the first phase of the Tax Refund for Tourists from Sunday, November 18 at the Abu Dhabi, Dubai, and Sharjah International Airports, the Federal Tax Authority (FTA) has confirmed.

The digital scheme – announced by the UAE cabinet earlier this year – is being undertaken by operator Planet and applies to the 5 per cent VAT that was introduced in the country on January 1.

The second phase of the scheme, which will extend to all the other airports and land and sea ports in the UAE, will begin on December 16, 2018.

Ahead of implementation, the FTA has clarified certain key aspects of the scheme.

The authority will collect an administrative fee amounting to 15 per cent of the VAT amount refunded to the overseas tourist, and a fixed fee of Dhs4.8 for every claim.

The operator of the scheme – Planet – will deduct these fees from the total amount to be refunded to the overseas tourist on behalf of the FTA, a statement said.

The FTA also stated that the maximum cash amount that can be returned to a tourist for a 24-hour period is Dhs10,000.

Tourists also cannot claim VAT refund unless the total value of tax-inclusive purchases issued by the retailer is Dhs250 or more, the FTA said.

Meanwhile, the FTA has specified three categories of goods to be excluded from the refunds scheme –

* Any goods that the overseas tourist does not have with them once leaving the UAE

* Goods that were entirely or partially consumed in the UAE or any other implementing state

* Motor vehicles, boats and aircrafts

Also read: UAE says tourists can reclaim VAT from November 18

The FTA also outlined five steps that participating retailers must follow when a customer asks to make a purchase under the refunds scheme.

1. Conduct the necessary due diligence to verify whether the customer is an “overseas tourist”; that the tourist was in the UAE when making the purchase; and that they were present at the retail store along with their purchase invoices when claiming the refund documentation. The procedure also calls for determining if the supply was made in a period not exceeding 90 days on the date on which the refund claim is requested.

2. Record the customer’s information and details of the purchase and issue the necessary documents for the customer to claim the VAT refund when exporting the goods.

3. Comply with all the procedures pertaining to handing over, packaging and delivering goods, according to FTA conditions set for certain goods or categories of goods, as well as meet other conditions determined in the agreement approved by the retailer to offer tax-free purchases.

4. Verify that the customer is 18 years of age or older before issuing them with refund claim. The scheme operator, meanwhile, is prohibited from refunding taxes to overseas tourists before verifying that the said tourist exports the goods in question outside the UAE within 90 days.

5. Verify that the exported goods and the refund claim adhere to the requirements agreed upon with the FTA. Planet can enlist a third party to verify these criteria if authorised to do so by the FTA.

Also read: Here’s how the UAE’s VAT refund system for tourists will work