Article-67 of the Cabinet Decision No (52) of 2017 on the Executive Regulations of the Federal Decree-Law No (8) of 2017 on Value Added Tax empowers the Federal tax Authority to implement a VAT Refund Scheme for Foreign Businesses in order to allow them a refund of VAT on expenses incurred in UAE.
The FTA has recently published a guide on this matter. The key highlights of the guide are as under:
Who can apply for the refund?
Only those foreign businesses that meet the following conditions are eligible to apply for a refund:
- They must not have a place of establishment1 or a fixed establishment2 in the UAE or the Implementing State3;
- They are not a Taxable Person4 in the UAE;
- They are registered as an establishment with a competent authority in the jurisdiction in which they are established;
- They are from a country that has a value-added tax and which also provides refunds of VAT to UAE entities in similar circumstances.
Businesses resident in any GCC State that is not considered to be an Implementing State may submit a VAT refund application to claim back VAT incurred in the UAE under this scheme.
VAT refund shall not be available if any of the following applies:
- If the Foreign Business makes supplies in the UAE and the recipient in UAE is not obliged to account for VAT under the reverse charge mechanism.
- If the input tax in respect of any goods or services would not be recoverable by a taxable person in the UAE.
- If the Foreign Business is a non-resident tour operator.
Important procedural points:
- The claim for any refund shall be made on an electronic form which will soon be provided for the purpose by the Authority.
- The period of the claim shall be 12 calendar months
- The minimum claim amount of Tax that may be submitted under VAT Refunds for Foreign Businesses Scheme shall be AED 2,000.
- For the calendar year 2018, refund applications can be made from 1st April 2019. For the Calendar year 2019 applications will be accepted from 1st March 2020.
- Original Tax Invoices for which businesses are claiming the VAT refund should be retained, as they may be required to be presented.
- Place of Business: The place where a Business is legally established in a country pursuant to the decision of its establishment, in which significant management decisions are taken and central management functions are conducted.
- Fixed Establishment: Any fixed place of business, other than the Place of Establishment, in which the Person conducts his business regularly or permanently and where sufficient human and technology resources exist to enable the Person to supply or acquire Goods or Services, including the Person’s branches.
- Implementing states: The GCC States that have implemented VAT in full compliance with the Common VAT Agreement of the States of the Gulf Cooperation Council and which is recognizing the UAE as an Implementing State.
- Taxable Person: Any Person registered or obliged to register for Tax purposes under the VAT Law.
Last Updated: 5th January 2019
This article is contributed by:
CA Shashank Shekhar
Assistant Manager, Taxation
Tag: Business Visitors, VAT in UAE, VAT Refunds