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16 April 2024

FTA begins process for refunding VAT to business visitors

By Wam

The Federal Tax Authority, FTA, has begun implementing the Value Added Tax, VAT, refunds for business visitors while noting that a dedicated application form for the procedure is available on its website.

In a press statement issued today, the FTA explained all the procedures with regard to the refund of VAT to business visitors. The FTA also published a guide through its website which can be accessed through the link: Guide – VAT Refunds for Business Visitors.

Khalid Ali Al Bustani, FTA Director-General, said, "Reciprocity is a key condition for the procedure, whereby the authority will collaborate with countries that refund VAT for UAE businesses visiting their territories.

"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 FTA clarified that the period of each refund claim shall be a calendar year, noting that for claims in respect of the 2018 calendar year, it started accepting refund applications as of 1st April, 2019. However, in subsequent calendar years, the opening date for refund applications submission will be 1st March of the following year. That means for the period 1st January to 31st December, 2019, applications will be accepted as of 1st March, 2020.

The minimum claim amount of each application is set at AED2,000, which may consist of a single purchase or multiple purchases. The authority urged potential applicants to hold on to the original tax Invoices as they would have to submit them along with their applications while claiming refunds.

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 legislation, therefore, not recoverable by a Taxable Person in the UAE, and finally, if the Foreign Business is a non-resident tour operator.

The FTA outlined four conditions for the recovery of VAT. These are, 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.