The UAE’s Federal Tax Authority (FTA) has started implementing the Value Added Tax (VAT) refunds scheme for business visitors, it announced on Tuesday.
The authority has started receiving applications made via a dedicated form on its website.
Under the scheme, four conditions will allow foreign businesses to recover VAT incurred in the UAE:
* Foreign businesses must have no place of establishment or fixed establishment in the UAE or any of the VAT-implementing GCC states
* They must not be registered or a taxable person in the UAE
* They must be registered as an establishment with a competent authority in the jurisdiction in which they are established
* They must be from a country that implements VAT and that equally provides VAT refunds for UAE companies in similar circumstances
Businesses residing in any GCC state that is not considered to be an implementing state may still apply to reclaim VAT incurred in the UAE under the scheme, except in three situations –
* If the Foreign business in question makes supplies in the UAE, unless the recipient is obliged to account for VAT under the Reverse-Charge Mechanism;
* If the input tax in respect of any goods or services is non-recoverable as per VAT legislations and therefore not recoverable by a taxable person in the UAE
* If the foreign business is a non-resident tour operator
The minimum claim amount of each VAT refund application submitted by business visitors is set at Dhs2,000, which may consist of a single purchase or multiple purchases.
The FTA also urged potential applicants to hold on to the original tax invoices on the purchases for which they would like to reclaim VAT, as they will be required to submit them along with their applications.
The period of each refund claim is a calendar year, and the FTA has started accepting refund applications claims for 2018 as of April 1, 2019.
However, in subsequent calendar years, the opening date for refund applications submission will be March 1 of the following year – meaning for the period from January 1 to December 31, 2019, applications will be accepted as of March 1, 2020.
FTA director general Khalid Ali Al Bustani said that the procedure aims to “establish the UAE as a global hub for trade and creates an investment-friendly environment to support economic activities in the sectors where business visitors are active”.
“Reciprocity is a key condition for the procedure, whereby the authority will collaborate with countries that refund VAT for UAE businesses visiting their territories,” he explained.
The UAE implemented 5 per cent VAT on the supply of most goods and services in the country on January 1, 2018.