The UAE’s Federal Tax Authority (FTA) has outlined four conditions that would allow foreign businesses to recover Value Added Tax (VAT) incurred in the UAE.
To be eligible for the VAT refund, foreign businesses –
* Must not have a place of establishment in the UAE or in any of the VAT-implementing GCC states (currently Saudi Arabia and Bahrain)
* Must not be a taxable person in the UAE
* Must be registered as an establishment with a competent authority in the jurisdiction in which they are established
* Must be from a country that implements VAT and that equally provides VAT refunds to UAE businesses in similar circumstances
The authority also clarified that businesses residing in any of other GCC states may still submit a VAT refund application.
It outlined three situations where VAT cannot be reclaimed –
The first is if the foreign business makes supplies in the UAE (unless the recipient is obliged to account for VAT under the reverse charge mechanism).
Secondly, if the input tax in respect of any goods or services is “blocked” from recovery and, therefore, not recoverable by a taxable person in the UAE.
The third is if the foreign business is a non-resident tour operator.
The FTA also clarified that the period of each refund claim shall be a calendar year (January 1 to December 31), and refund applications for 2018 can be made as of April 1, 2019.
For subsequent calendar years, the opening date for accepting refund applications will be March 1 of the following year.
The minimum claim amount of each VAT refund application submitted by business visitors is Dhs2,000, which can consist of a single purchase or multiple purchases.
Potential applicants have also been urged to keep the original tax invoices on the purchases for which they would like to reclaim VAT, as they will be required to be submitted along with the refund applications.
FTA director general Khalid Ali Al Bustani said the refund procedure was “clear and transparent” and that it supported economic activities in sectors such as tourism, trade, exhibitions, and conferences.
The UAE implemented 5 per cent VAT on the supply of most goods and services in the country on January 1, 2018.