With the introduction of Value Added Tax in the United Arab Emirates, the Federal Tax Authority (FTA) has established various VAT refund schemes for eligible businesses and individuals to reclaim refunds on VAT. Whether you are a tourist visiting the UAE, a foreign company, or a UAE national building a new residence, understanding VAT refund services in UAE can not only improve cash flow but also stop costs from piling up.
What is a VAT refund in Dubai?
VAT refund services in UAE allow VAT-registered businesses and individuals to reclaim VAT paid on eligible expenses. It is usually done when the tax paid on purchases (input tax) exceeds the tax collected on sales (output tax). The VAT registrant can reclaim the excess amount from the Federal Tax Authority (FTA).
VAT refund in Dubai offers several benefits, such as lower costs for foreign entities, reduced property ownership expenses for UAE nationals, and financial incentives for tourists. The three main categories eligible for VAT refund services in UAE are:-
Foreign Businesses: Can claim refunds annually by submitting a refund request form.
UAE Nationals Building New Residences: Can claim refunds through a special form that can be downloaded from the FTA website.
Tourists: Can claim refunds at designated airports or self-service kiosks upon departure.
VAT refund services in UAE: Why and how to claim it?
The UAE imposes VAT at a standard rate of 5% on most goods and services at the time of production and distribution. While businesses and individuals pay VAT while making purchases, they can claim back the paid VAT under specific circumstances. Here’s a brief overview of the various VAT refund schemes, eligibility criteria, and claiming process for different types of claims in the UAE.
1. VAT Refund for Tourists
Tourists can claim VAT refunds on purchases made during their stay in the UAE, provided they meet the following conditions:-
Non-Residents: Tourists who are non-residents of the UAE and do not possess a UAE residence or work permit are eligible for this refund.
Minimum Purchase: The minimum value of purchases must be AED 250.
Eligible Goods: Consumable goods cannot be claimed for refund. However, items like clothing, electronics, and souvenirs are eligible, provided they are taken out of the UAE in the same condition they were purchased.
Timeframe for Refund: Goods must be taken out of the UAE within 90 days from the date of purchase.
2. Procedure to Claim VAT Refunds as a Tourist:-
Shop at Participating Stores: The retail store from which the goods are being purchased must be registered for the VAT refund scheme. Moreover, a tax-free tag or form needs to be obtained along with the tax invoices.
Visit the Refund Kiosk at the Airport: The applicant must go to a VAT refund kiosk at the airport and provide their passport, goods, and tax invoices for processing.
Submit Documents: The applicant can opt for a refund either via credit card or cash at the kiosk.
Goods Inspection: The authorities can inspect the purchased goods to verify the tax-free tags and invoices.
By following this process, tourists can claim VAT refunds quickly and efficiently.
VAT Refund for Business Visitors
Foreign individuals visiting the UAE for business purposes may also be eligible for VAT refunds under specific conditions:-
No Establishment in the UAE: The applicant must not have a registered entity in the UAE.
Non-Taxable Entity: The applicant claiming VAT refund must not be a taxable person or conduct business in the UAE.
Reciprocal Agreements: The UAE must have a reciprocal VAT refund agreement with the home country of the visitor.
Minimum Refund Amount: The VAT refund claim must be above AED 2,000.
Procedure to Claim VAT Refunds as a Business Visitor:-
Create an e-Services Account: The applicant must access the FTA portal and create an e-Services account. Upon registration, they must create a taxable person account or a special refunds profile.
Complete the Refund Form: Under the ‘Business Visitor Refunds’ section, the form must be completed, along with the submission of all required documents, including tax invoices and proof of payment.
Submit Documents: The original hard copies of tax invoices and the Tax Compliance Certificate attested by the UAE Embassy should also be sent to the FTA.
Track the Status: The status of the refund request can be tracked via the e-Services portal.
VAT Refund for UAE Nationals Building New Residences
UAE nationals constructing a new home can claim VAT refunds on certain construction-related expenses:-
UAE Nationals Only: UAE nationals who hold a valid Family Book can apply for this scheme.
New Residence: The property must be new and used solely for residential purposes, not for commercial purposes.
Qualifying Expenses: Applicants can reclaim VAT on building materials, contractor services, architects, engineers, and transport and clearing agent fees for imported building materials.
Procedure to Claim VAT Refunds for Building a New Residence:-
Prepare Documents: The applicant must arrange necessary documents for the refund application, including a Family Book, Emirates ID, property completion certificate, site plan, proof of land ownership, and proof of payments made to contractors.
Submit the Application: After logging into the FTA e-Services portal, the applicant must create a special refunds profile and submit an online application along with all documents arranged at the start.
Verification Process: The FTA will review the application, and if eligible, will send the claim request to a Verification Body. At this stage, additional documentation may be required to verify the expenses eligible for VAT refund in Dubai.
Refund Issuance: Once the claim is approved, the FTA will process the VAT refund and issue it to the applicant.
Retention Payments: If the applicant intends to make retention payments to contractors, they need to submit another application within six months to reclaim VAT related to these payments.
General process for Taxable Persons: VAT refund services in UAE
Taxable entities, including businesses and individuals who are registered for VAT in the UAE, can request VAT refunds when their input tax surpasses their output tax. After submitting the VAT return, they can place their refund request by following the given steps:-
Step 1: Access the e-Services Portal and navigate to the ‘VAT Refunds’ section.
Step 2: Fill out the Refund form with the necessary bank details and a bank account validation letter.
Step 3: The FTA will review the claim and process the approved refunds shortly.
Important considerations: VAT refund services in UAE
To reclaim VAT refund on eligible expenses, the applicants must keep the following important things in mind:-
Document Retention: Maintain all relevant documents, such as invoices, proof of payments, and tax certificates, for VAT refunds and potential audits.
Timely Submission: The application must be submitted within the prescribed timeframe.
FTA Compliance: To receive proper approval for VAT refund claims without any delays or rejection, make sure to submit accurate forms and the requested documents.
VAT refund services in UAE: Non-negotiable conditions under VAT
VAT rules in the UAE need to be followed by the book, even for claiming VAT refunds. Failing to meet even one condition can lead to significant consequences. Therefore, the qualified applicants must tick off all the boxes in the checklist while claiming refunds:-
VAT Registration –The applying entity must be formally registered with the FTA for VAT and possess a valid Tax Registration Number (TRN).
Business Purpose – The VAT meant for recovery must be a genuine business expense. Personal purchases and non-recoverable items like dinners with clients or entertainment for outsiders are excluded from this scheme.
Valid Tax Invoice – The applicant must have a proper FTA-compliant invoice showing the VAT amount, the supplier’s TRN, and all the required details.
Payment – The applicant should pay the supplier for the purchase. Promises or unsigned deals cannot be filed for recovery.
Taxable Supplies – The reclaiming VAT must be connected to taxable supplies, either standard-rated (5%) or zero-rated (0%).
Thus, it's all about keeping the math fair. Missing any of these conditions can result in penalties. Therefore, it is advised to work with tax professionals in Dubai who will make sure each box is checked properly.
Common pitfalls and tips to avoid them: VAT refund services in UAE
Most delays and rejections in the VAT refund process occur due to minor mistakes that can simply be avoided. For instance,
Wrong Input Tax Claims – Misreporting or claiming VAT on things that are not eligible, such as entertaining clients, using company vehicles for personal purposes, etc., can lead to penalties. Therefore, make sure not mix up these transactions and keep the eligible expenses separate from non-eligible ones.
Late Filing - Missing a VAT return or delaying a refund application can result in penalties. Therefore, make sure to adhere to the strict timelines of the FTA to keep things going smoothly.
Poor Record-Keeping – Support every claim with invoices and relevant documents. FTA instructs businesses to keep these documents for at least five years to prevent the risk of rejection or audit.
Simplify VAT refund in Dubai with our expert services
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