VAT Refund

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What is VAT Refund?

All the registered business are required to file a VAT return furnishing the details of sales, purchases output VAT and input VAT paid during the tax period. Here, the output VAT is the amount which is collected on sales and Input VAT is the amount which is paid to the supplier towards purchases / expenses. The eligible input VAT amount will be allowed to be adjusted with the output VAT amount. After adjusting the output VAT and Input VAT, the result will lead to one of the following situations.

VAT Payable: If output VAT amount is higher than the Input VAT, the balance will be VAT payable which needs to be paid to FTA.

VAT Refundable: If output VAT is lesser than the input VAT amount, the excess balance will be VAT refundable.

Given below are the two options about how the taxpayer must use the excess input VAT which is commonly known as VAT refundable:

  1. For a VAT refund, only the taxpayer will be qualified
  2. If he does not want to request for a refund of the excess input VAT, then the excess recoverable tax will be carried forward to subsequent tax periods and can be used to offset against the payable tax and/or penalties, or he can apply for a refund later.

How to Treat VAT Refundable as per UAE VAT?

The taxpayer has following two options in treating the excess input VAT commonly known as VAT refundable:

  • 1. The taxpayer will be eligible to request for a VAT refund
  • 2. If he does not wish to request for a refund of the excess input VAT, the excess recoverable tax will be carried forward to subsequent tax periods and can be used to offset against the payable tax and / or penalties, or he can apply for a refund later at any point in time

VAT Tax Refund Conditions For UAE Tourist

UAE VAT Law on Tourist Scheme. {Source ~ Federal Decree-Law No (8) of 2017 on Value Added Tax}

As per the Article 68 Clause 2 of Executive Regulations of the Federal Decree-Law No (8) of 2017 on Value Added Tax following conditions shall apply to the Tax Refunds Scheme for Tourists:

  1. The Goods which are subject to the Tax Refunds for Tourists Scheme must be supplied to an overseas tourist who is in the State during the purchase of the Goods from the supplier.
  2. At the Date of Supply, the overseas tourist intends to depart from the State within 90 days from that date, accompanied by the Goods.
  3. The relevant Goods are exported by the overseas tourist to a place outside the Implementing States within 3 months from the Date of Supply, subject to such conditions and verifications as may be imposed by the Authority.
  4. The phrase “overseas tourist” means any natural Person who is not resident in any of the Implementing States and who is not a crew member on a flight or aircraft leaving an Implementing State.
  5. The Authority may publish a list of Goods that shall not be subject to Tax Refunds for Tourists Scheme

Who are Eligible for VAT Tax Refund?

The following are the criteria that must be met to have a tourist tax refund.

  • The item/s should be supplied from UAE
  • You should make sure that you’ll be exiting the country with the item within 90 days upon purchase.
  • Goods should belong to the tax refund system of UAE.

Minimum limit to claim tourist tax refund in UAE

The FTA and the Tourist Refund Scheme authority has set the minimum retail purchase liable for VAT refund claims is Dh250.

How to claim VAT Refunds

In order to claim a refund of taxes paid by them in the UAE, the tourists will have to show their original passport to the authority.

  • Step No. 1 – To get the Tax-free tag

Once you are finished with your shopping, a “tax-free tag” will be attached to your payment receipt. This “tax free tag” is very important as it will help you further to avail Tourist Refund Scheme with a minimum purchase of AED 250/-. This “tax free tag” is valid for Tourist Refund Scheme for a period of 90 days from the date of purchase. Once your “tax free tag” is validated you will receive 85% of the VAT with less AED 4.80/- deducted for admin fee.

  • Step No. 2 – Validation

It is important to note that validation is mandatory in order to avail Tourist Refund Scheme. For this purpose, you will be required to provide your passport / boarding pass and additional checks will be carried out to ensure everything is carried out in the right way. The validation can be done in 3 major airports of UAE until 16th December 2018 which is Dubai International Airport, Abu Dhabi and Sharjah airport.  Later, validation points for Tourist Refund Scheme will be available in 9 other locations in different emirates.

  • Step No. 3 – Methods of refund

There are two types of refund in which you can avail Tourist Refund Scheme, i.e., by cash or credit. There will be assistance provided by the planet tax free staff in order to get your refunds availed by Tourist Refund Scheme. No one apart from the owner can avail the refund.

Processing by the FTA
The refund application will be processed by the FTA within 20 business days, once they receive the verification report from the verification body. The taxpayer will be notified regarding this via e-mail and once the claim is processed and approved, the FTA will make the refund payment within 5 business days.

LINK – VAT Refund form