FTA Guide on Refund of VAT on the Construction & Operation of Mosques

The construction and operation of mosques is a common activity carried out by relevant persons in the UAE. However, since it doesn’t constitute a business activity, recovery of input tax was not possible under the normal rules for refund of VAT in the UAE. The UAE now allows the Refund of Input Tax Incurred on the Construction and Operation of Mosques as per Cabinet Decision No. (82) of 2022. Tax agents in Dubai can provide you with further information on the provisions of this law.

For making the law clear to the relevant persons, the UAE Federal Tax Authority (FTA) has issued a new guideline (VATGRM1). As per the new VAT GRM1, the FTA will refund the VAT paid on any supply or import made by a person or class of persons listed in the Cabinet Decision and will provide a special refund mechanism for eligible persons constructing and/or operating a Mosque, subject to certain conditions.

The following blog will provide you with key information on the eligibility criteria and conditions and requirements you need to meet for the Refund of VAT Incurred on the Construction and operation of Mosques in the UAE:

How does the FTA Define Construction of a Mosque under UAE VAT?

The FTA states that the term ‘construction of mosque’ include the following that is incurred before the Mosque became operational:

• The actual construction process of the mosque
• Furnishing and equipping process of the mosque
• Supply of the necessary equipment, devices and maintenance
• Any requirement necessary to carry out authorised activities of the mosque before it becomes operational
• All that is required to carry out all the authorised activities of the Mosque before the Mosque becomes operational

Who is eligible for a VAT Refund on the Construction & Operation of Mosques in the UAE?

The FTA states that a donor is eligible for the refund of VAT incurred on the construction of a Mosque. However, a donor must meet all of the following eligibility criteria for the recovery of VAT incurred on the construction and operation of mosques in the UAE:

• The donor needs to incur VAT in the UAE
• The goods and services must have been purchased particularly for building the mosque
• The donor needs to obtain and keep a Mosque Operation Commencement Certificate
• The Mosque has been handed over or is intended to be handed over by the Donor to any other person for whom the General Authority of Islamic Affairs and Endowments or the local authority concerned with Mosques’ affairs approved the handover of the Mosque, unless the handover constitutes a taxable supply, or
• The Donor operates the Mosque in accordance with the approval obtained from the Competent Authority

How to Apply for a VAT Refund in the UAE?

Once the eligibility criteria are met, the donor can apply for a refund of the VAT incurred on goods and services acquired specifically for the construction of the Mosque. The application must be made through the FTA’s e-Services platform. Tax agents in Dubai can help you apply for a VAT refund.

Who is eligible for the refund of VAT incurred on the operation of mosques in the UAE?

The operator of a mosque is eligible to apply for VAT refunds in the UAE subject to certain conditions. The refund will cover only the VAT incurred on goods and services acquired directly in connection with the operation of that Mosque. Tax consultants in Dubai can help you further. The following are the conditions that a mosque operator must meet to be eligible for applying for a VAT refund in the UAE:

1. The operator has incurred VAT in the UAE
2. Goods and services must have been procured specifically for the operation and maintenance of the mosque
3. Must register the building as a mosque with the competent authority (General Authority of Islamic Affairs and Endowments or the local authority concerned with Mosques’ affairs)
4. The operator must hold a written time-limited permit issued from the Competent Authority for the Operation of the Mosque during the period for which a Refund Request is made

How a mosque operator can apply for VAT refunds in the UAE?

After ensuring all the eligibility conditions have been met, a mosque operator can apply for a refund for the VAT incurred on goods and services acquired directly for the Operation of the Mosque through the FTA’s e-Services platform. Consult with VAT consultants in Dubai for more information on the application process.

Consult with the Best Tax Agents in Dubai, UAE

Applying for a refund of VAT incurred in the UAE can be complex for businesses as it is tough for them to crack the terms and conditions put forward by the FTA. However, the process can be made simple by consulting with tax agents in Dubai such as Jitendra Chartered Accountants (JCA). We are one of the top VAT consultants in Dubai with over 20 years of experience. JCA can provide robust tax services in Dubai such as VAT accounting, VAT returns filing, VAT refunds etc. Talk with us if you need any help on any tax-related matters.