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20 April 2024

Decision made on tax refunds for tourists scheme

By Wam

H.H. Sheikh Hamdan bin Rashid Al Maktoum, Deputy Ruler of Dubai, Minister of Finance, and Chairman of the Board of the Federal Tax Authority, FTA, has issued the Decision No. 02 of 2018 on the Tax Refunds for Tourists Scheme, setting out the implementation dates for phases one and two and the procedures for the verification of tourists’ eligibility for the tax refund.

The Decision also includes the fees charged for refunds and their application, the maximum cash recovery, the minimum value of purchases subject to the refund, and the goods excluded from the refund.

The Decision comprises of seven clauses and stipulates that Value Added Tax, VAT, refund claims shall be provided by retailers participating in the Tax Refunds for Tourists Scheme as of Sunday, 18th November, 2018. An overseas tourist may get a refund of the VAT at the Abu Dhabi, Dubai, and Sharjah International Airports as of next Sunday. The overseas tourist may also recover the VAT at the other airports and land and sea ports in the UAE as of December 16, 2018.

Furthermore, the Decision determined five steps that retailers must follow when a customer asks to make a purchase under the Tax Refunds for Tourists Scheme. The first of which represents conducting the necessary due diligence – as outlined by the FTA and Scheme’s Operator – to verify whether the customer is an "overseas tourist" as per Clause 3 of Article 68 of Cabinet Decision No. 52 of 2017; that they are in the UAE when making the purchase; and that they were present at the retail store along with their purchase invoices when claiming the refund documentation.

The procedure also calls for determining if the supply was made in a period not exceeding 90 days on the date on which the refund claim is requested.

Step two requires the retailer to record the customer’s information and details of the purchase – again as determined by the FTA and the Scheme Operator – and to issue the necessary documents for the customer to claim the VAT refund when exporting the goods.

As per step three, the retailer must comply with all procedures pertaining to handing over, packaging and delivering goods, according to FTA conditions set for certain goods or categories of goods, as well as meeting other conditions determined in the agreement approved by the retailer to offer tax-free purchases.

Retailers must also verify that the customer is 18 years of age or older before issuing them with refund claim. The scheme operator, meanwhile, is prohibited from refunding taxes to overseas tourists before verifying that the said tourists exports the goods in question outside the UAE within 90 days of the date of supply of such goods.

The final step calls on the Scheme Operator to verify that the exported goods and the refund claim adhere to the requirements agreed upon with the Federal Tax Authority. The operator may enlist a third party to verify these criteria if authorised to do so by the FTA.

According to the Decision, the authority may collect fees from overseas tourists applying for the tax refund, namely, an administrative fee amounting to 15 percent of the VAT amount refunded to the overseas tourist, and a fixed fee of AED4.8 for every claim. The Scheme Operator then deducts these fees from the total amount to be refunded to the overseas tourist on behalf of the FTA. The maximum cash amount that can be returned to a tourist for a 24-hour period is AED 10,000.

The Decision also stipulates that tax cannot be refunded under the Scheme unless the total value of tax-inclusive purchases issued by the same Taxable Person – is AED250 or more.

Decision No. 02 of 2018 specified three categories of goods to be excluded from the Tax Refunds for Tourists Scheme, namely: Any goods that the overseas tourist does not have with them once leaving the UAE; goods that were entirely or partially consumed in the UAE or any other implementing state; and motor vehicles, boats and aircrafts.