FTA begins process of refunding VAT to visitors

Business Bureau, Gulf Today

ABU DHABI: The Federal Tax Authority (FTA) has started implementing the Value Added Tax (VAT) Refunds for Business Visitors procedure, noting that a dedicated form for refunding VAT to business visitors has been made available through its website.

In a press statement issued on Tuesday, the Authority announced that it is now receiving applications to refund VAT incurred by business visitors to the UAE in 2018. The FTA explained that the VAT Refunds for Business Visitors procedure calls for refunding taxes to business visitors who have no place of establishment in the UAE or another GCC implementing state; who are not registered or are not a Taxable Person in the UAE; who are registered as an establishment with a competent authority in the jurisdiction in which they are established; and who are from a country that implements VAT and refunds VAT to UAE entities in similar circumstances.

The Federal Tax Authority published a guide through its website, explaining the VAT Refunds for Business Visitors procedure and criteria, which can be accessed through the link: Guide - VAT Refunds for Business Visitors.

FTA Director General Khalid Ali Al Bustani said that the new clear and transparent procedure complements efforts 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. This, in turn, reflects positively on various other sectors, such as trade, exhibitions, and conferences, among others.

“Reciprocity is a key condition for the procedure, whereby the Authority will collaborate with countries that refund VAT for UAE businesses visiting their territories,” Al Bustani explained. «The procedure abides by Federal Decree-Law No. (8) of 2017 on VAT and its Executive Regulations, which call for refunding taxes on supplies or imports made by a Person not residing in the UAE or any of the Implementing States, provided they meet the necessary conditions.” The Federal Tax Authority clarified that the period of each refund claim shall be a calendar year, noting that for claims in respect of the 2018 calendar year, FTA started accepting refund applications as of April 1, 2019. However, in subsequent calendar years, the opening date for refund applications submission will be March 1st of the following year; this means that for the period from January 1 to December 31, 2019, applications will be accepted as of March 1, 2020.

The FTA went on to stress that 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 Authority 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.

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 this scheme, the FTA assured, outlining only three situations where VAT cannot be reclaimed: 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, therefore, not recoverable by a Taxable Person in the UAE; and finally, if the Foreign Business is a non-resident tour operator.

The Federal Tax Authority outlined four conditions that would allow foreign businesses to recover VAT incurred in the UAE, namely: Foreign businesses must have no place of establishment or fixed establishment in the UAE or any of the VAT-implementing GCC states (as per the terms of the Common VAT Agreement of the States of the Gulf Cooperation Council); 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; and finally, they must be from a country that implements VAT and that equally provides VAT refunds for UAE companies in similar circumstances.

The Federal Tax Authority was established by Federal Decree-Law No. (13) of 2016 to help diversify the national economy and increase non-oil revenues in the UAE through the management and collection of federal taxes based on international best practices and standards, as well as to provide all means of support to enable taxpayers to comply with the tax laws and procedures. Since its inception in 2017, the FTA has been committed to cooperate with the competent authorities to establish a comprehensive and balanced system to make the UAE one of the first countries in the world to implement a fully electronic tax system that encourages voluntary compliance, with simple procedures based on the highest standards of transparency and accuracy – beginning from registration, to the submission of tax returns, to the payment of due taxes through the Authority’s website.