The United Arab Emirates is one of the countries that offer the greatest job opportunities for entrepreneurs. However, these opportunities bring with them a series of regulations that investors must comply to the letter. One of the many regulations has to do with taxes on companies, tourists, etc. In the following lines, we will talk about the VAT refund in the UAE.
In this article, you will find information about the Value Added Tax, the registration process, and the VAT rates. You will also get to know what is a VAT refund in the UAE and how we can help you with this process.
- What is VAT?
- How to register for VAT?
- What are the VAT rates?
- VAT implementation in the UAE
- VAT for businesses
- How is the VAT refund process in the UAE?
- Who is eligible for a UAE tourist VAT refund?
- How can we help you with the VAT refund in the UAE?
1. What is VAT?
The Value Added Tax or VAT is an indirect tax imposed on most supplies of services and goods that are bought and also sold. You can also find this tax as a “good and services tax”.
VAT is one of the most common taxes around the world. Around 150 countries have implemented VAT, including all the countries of the European Union, Australia, Canada, New Zealand, Malaysia, and also Singapore.
This tax appears in each step of the “supply chain”. Generally, final consumers bear the VAT cost while businesses account and collect for the tax. Acting, in a certain way, as a tax collector on behalf of the government.
A business pays the government all the taxes it collects from customers while it may also receive a refund on tax that it has paid to its suppliers. The tax receipt to the government indicates the “valued add” throughout the supply chain.
2. How to register for VAT?
The registration may be voluntary or mandatory, depending on the business revenue generated.
2.1 Mandatory registration
A company must register for VAT if the total value of its imports and sales within the UAE exceeds the mandatory registration threshold of AED 375,000 for the previous 12 months or within the upcoming 30 days.
2.2 Voluntary registration
A company can voluntarily register for VAT if the total value of its imports and sales within the UAE exceeds the voluntary registration threshold of AED 187,500 for the previous 12 months or within the upcoming 30 days.
Small scale businesses and startups can also register voluntarily if their expenses exceed the voluntary registration threshold, thereby making them eligible for a tax credit.
3. What are the VAT rates?
The VAT rate is 5% for most services and goods except for these exempted or 0% tax categories.
3.1 0% VAT
- Goods and services exported outside the GCC
- Certain education and healthcare supplies
- International transportation
- Newly constructed residential properties
- Certain investment-grade precious metals (e.g silver and gold of 99% purity)
3.2 VAT exempt
- Public transport
- Life insurance
- Residential properties
- Certain financial services
4. VAT implementation in the UAE
The UAE Federal and Emirates government provide residents and citizens with many different public services. For example, roads, public schools, hospitals, waste control, parks, and police services. The citizens pay for these services using government budgets.
Value Added Tax provides the United Arab Emirates with a new source of income, thus contributing to the continued provision of high-quality public services in the future.
It also helps the government to reduce the dependence on income derived from oil and hydrocarbons.
4.1 VAT implementation in coordination with other GCC countries
The UAE is part of a group of countries that are connected through “the Economic Agreement between the GCC States” and “the GCC Customs Union”. This group of countries has historically worked together to design and implement new public policies that boost the economy of the nations.
5. VAT for businesses
All companies in the UAE need to record their financial transactions and ensure that these records are accurate and also up to date. Businesses that meet the minimum annual turnover requirement (as evidenced by their financial record) must register for VAT. Companies that do not believe it is necessary to register for VAT must maintain their financial record in any event. Just in case the government needs to establish whether they should be registered.
5.1 VAT-registered businesses generally
- Keep a range of business records
- Reclaim any VAT they’ve paid on business-related services or goods.
- Charge VAT on services or taxable goods they supply.
If you register your company in the Value Added Tax, you must report the amount of VAT you have charged and also the amount of VAT you have paid to the government on a regular basis. This must be a formal submission and you must report it online.
If you charged more VAT than you paid, you will have to pay the difference to the government. If you paid more tax than you’ve charged, you are entitled to reclaim the difference.
5.2 VAT in real estate
The handling of VAT will depend on whether it is a residential or commercial property. Supplies (including leases or sales) of commercial properties are taxable at the standard VAT (i.e 5%)
On the other hand, the Value Added Tax does not apply to supplies of residential properties. This ensures that this tax does not constitute an irreparable cost to those who purchased property. In order to ensure that real estate developers can recover VAT on the construction of residential properties, the first supply of these properties within three years of completion at the time of VAT introduction is zero-rated.
5.3 Zero-rated sector
The following main categories of supplies will have a 0% VAT:
- International transportation and related supplies
- Exports of services and goods outside the GCC
- Certain investment-grade precious metals (e.g silver, gold of 99% purity)
- Supply of certain healthcare services, and also the supply of relevant goods and services.
- Newly constructed residential properties.
- Supply of certain education services, and also the supply of relevant goods and services.
5.4 VAT-exempt sectors
Some of the categories exempted from VAT are the following:
- Bare land
- Local passenger transport
- Residential properties
- The supply of some financial services
6. How is the VAT refund process in the UAE?
A company can receive a refund from the government on tax that it has paid to its suppliers. To get a tax refund you must follow these simple steps:
- Log in to the respective governmental entity portal
- Select a VAT refund request
- Complete the requested form
- You will receive an email from the respective governmental entity detailing the result of your application.
6.1 VAT refund in the UAE for business visitors
The foreign businesses that meet the following conditions are eligible to apply for a VAT return:
- They are not taxable people in the UAE
- The company has no place of establishment or fixed establishment in the UAE or any GCC-implementing state.
- They are not carrying any business in the UAE
The time to claim each refund is twelve months, and the minimum amount of each tax claim submitted by business visitors under the Foreign Business Scheme is AED 2,000.
6.2 New residences
The new residence VAT refund scheme applies to all UAE nationals that meet the following criteria:
- A natural person should be the one who makes the claim.
- The claim should be related to a newly constructed building to be used solely as a residence of the person or the person’s family.
Under this scheme, people can claim a refund of the tax paid on the expenses of constructing the residence.
The VAT refund in the UAE applies to the following expenses:
- Services provided by contractors, including services of engineers, architects, builders, and other similar services necessary for the successful construction of the residence.
- Building material (goods of a type normally incorporated by builders in a residential building) This does not include electrical appliances or furniture.
You must deliver the refund form to the corresponding government entities within 6 months after the date of completion of the building. The date of completion is:
- When the building is certified as completed by the municipality.
- When the building becomes occupied.
The visitors and tourists can claim a refund on VAT paid for purchases made during their stay in the country. The recovery of the payment will be made through a fully integrated electronic system that connects the retailers registered in the “Tax Refund for Tourists Scheme” with all ports of entry and exit from the UAE.
In order for a tourist to be able to claim a VAT refund in the UAE he must meet the following conditions:
- The goods must be purchased from a retailer who is participating in the “Tax Refund for Tourists Scheme”
- The tourist must have the explicit intention of leaving the UAE within 90 days from the date of supply.
- The process of export and purchase of goods must be carried out according to the requirements and procedures determined by the Federal Tax Authority.
- The individual has to export the purchased goods out of the UAE within 90 days from the date of supply.
6.4 Validation of the refund claim
All claims made by tourists must be validated at different validation points – special devices placed at departure ports. For example, border ports, seaports, and airports in the United Arab Emirates. Another example is if you are leaving Dubai as a tourist, you can perform the VAT refund process at the VAT counter at Dubai Airport.
A more detailed process is the following:
- Go to the designed validation point before checking in your luggage.
- Approach the immigration counter and present the original receipt with the Tax-free tag on it, a copy of your credit card, your passport, and obviously, the product purchased.
- After the successful validation, you can choose to refund via cash or card.
- Lastly, you will receive your refund.
Tourists can receive up to 85% of the total VAT amount. The remaining 15% is charged as administration fees. Also, please note that cash refunds are capped at AED 7,000 per day, following the new regulations imposed by the Federal Tax Authority.
This aims to reduce the shopper’s reliance on cash during financial transactions and help them to take advantage of the country’s technological advancement.
There is no limit on the maximum recoverable amount if the transactions are made through a credit card.
7. Who is eligible for a UAE tourist VAT refund?
Not all tourists can claim a VAT refund in the UAE. Due to certain regulations, only the following people are eligible for a VAT refund:
- Travelers aged 18 or over who are not residents of the United Arab Emirates
- GCC Nationals can claim VAT refunds
- Not a crew member on flights leaving the country.
Noe that additional regulations may apply to GCC Nationals residing in foreign countries for studying
8. How can we help you with the VAT refund in the UAE?
A quality tax, accounting service, and a VAT refund in the UAE are essential for the development of any company. Our team of professionals is ready to offer an end-to-end service of guidance and support to run your business efficiently and smoothly.
If you are ready to start the journey of getting a VAT refund in the UAE with us, our team is waiting for your call. Contact us and discover all the ways in which we help you; +971 43 316 688 or email us at firstname.lastname@example.org.
Are you in search for jobs? The Talent Point is the ideal place for you. Get ready to meet and connect with the best companies in the Middle East. If you are interested, send your CV to thetalentpoint.com or via email@example.com.