UAE Updates VAT Refund Guidance for Business Visitors: What’s in it for You?
Foreign businesses are allowed to claim VAT refund in the UAE subject to terms and conditions laid out by the Federal Tax Authority (FTA). The FTA recently issued guidelines revising conditions for business visitors to apply for a VAT refund. As per the new guidelines, the refund scheme applies to foreign businesses from a country that permits VAT refunds to UAE entities. Uninformed businesses can seek the help of VAT consultants in Dubai, UAE to apply for the VAT refund.
In the meantime, this article serves as an introduction to the various conditions and requirements for applying for the VAT refund. Apart from the conditions, the time period, documents and list of eligible countries are stated here. Read ahead.
Can All business visitors apply for a VAT Refund in the UAE?
No. The FTA has set out certain conditions and only those who meet these prerequisites are eligible to apply for VAT refund in the UAE. Only a foreign business can apply for a refund if it meets the following conditions:
The foreign business shouldn’t have a place of establishment or fixed establishment in the UAE or an Implementing State (GCC countries where VAT is implemented)
The foreign businesses should not be Taxable Person in the UAE
The foreign business shouldn’t carry out a business in the UAE
The applicant should carry out a business and must be registered as an establishment with a competent authority in the jurisdiction in which they are established
Who is Not Eligible for VAT Refund in the UAE?
While applying for a VAT refund in the UAE, business visitors must filter their request through the following conditions to confirm their eligibility. If they match with the following red flags, it means they are not eligible for a UAE VAT refund.
• Foreign businesses that make taxable supplies in the UAE, unless they can account for VAT under the reverse charge mechanism
The input tax incurred on the goods or services is non-recoverable by the taxable person as per the UAE VAT Law e.g., entertainment and motor vehicles available for personal use
The foreign business is from a country that doesn’t allow VAT refunds to UAE entities under similar situations
The Foreign Business is a non-resident tour operator
In what circumstances can you claim a Refund?
The FTA has set out a time period and a minimum amount limit for claiming a VAT refund in the UAE to reduce the administrative burden of business travellers. As per these conditions,
• The period of each Refund claim is fixed as 12 calendar months (an exception is Applicants resident in the GCC States that are not Implementing States)
• The minimum amount of VAT for which applicant can request a refund may be submitted under this scheme has been fixed as AED 2,000
List of Documents Required for Claiming a VAT Refund in the UAE
During the Refund claim process, business visitors will be asked to submit various documents as listed below. It is advisable that the applicants consult with the best VAT consultants in Dubai prior to starting the application process.
• Original Tax Compliance Certificate in Arabic or English issued by the relevant competent Tax Administration. It could be documents such as a business status certificate, certificate of commercial activities or equivalent. It should reflect the applicant’s tax registration number (“TRN”) attested by the UAE Embassy in the country of tax registration
• A declaration (Arabic or English) stating the percentage of input tax the applicant is eligible to recover on expenses. This is applicable if the foreign business undertakes exempt or non-business activities in the country of establishment, which do not give it the right to fully recover any input tax
Relevant tax invoices with valid TRN and proof of payment to support the VAT refund claim. The FTA will reject invalid tax invoice such as an invoice with an incorrect TRN
Copy of passport of the Authorised Signatory
Proof of Authority of the Authorised Signatory
It is important to note that the FTA has relaxed the requirement to provide original physical tax invoices. The authority now accepts system generated and scanned copies that can be emailed directly to the FTA. Also, the need to provide original paper copies of incorporation documents is no longer required; instead, the authority only asks for a tax compliance certificate. Seek the help of tax agents in Dubai to ensure all documents are complete and proper.
When should you submit your application to the FTA?
Since the period of each refund claim under this scheme is a calendar year, the opening date for applications will be March. For instance, a refund for the period 1 January 2020 – 31 December 2020, the FTA will accept applications from 1 March 2021. The deadline for submission of refund claims will be 31 August of each year. However, the calendar year restriction is not applicable for Businesses/applicants that are resident in any GCC State that is not considered to be an Implementing State according to the UAE tax legislation. It is advisable to submit the refund applications through top VAT consultants in Dubai to avoid any potential errors.
Consult with the Best VAT Consultants in Dubai, UAE
The revised guidance from the FTA on VAT refund for business visitors is a welcome change for the entire business community. Foreign businesses are now faced with less administrative burden in terms of the documents required for applying for VAT refund in the UAE. However, the applicants may face delays or rejection if the process is not executed properly, or invoices contain errors. Fortunately, the best VAT consultants in Dubai such as Jitendra Chartered Accountants ( JCA) provide the best tax services to businesses. JCA’s tax agents in Dubai assess the VAT refund eligibility and help in executing the process in compliance with existing rules.