VAT Refund for Business Visitors
The Federal Tax Authority (FTA) has published its updated version of the Guide on VAT Refunds for Foreign Business Visitors, which provides further clarification regarding the key procedures, as well as the timeline for submission of the application of refund and minimum amount which can be claimed. The Guide highlights the eligibility of foreign businesses for the refund. Foreign businesses which satisfy the following criteria shall be eligible for the refund:
- They have no place of establishment / fixed establishment in the UAE or a recognized implementing state.
- They are not a taxable person in the UAE.
- They are registered as an establishment in the jurisdiction in which they are established; and
- They are from a country that has VAT, and which provides VAT refunds to UAE entities in similar circumstances.
Further, 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.
However, the VAT refund shall not be available if:
- The foreign business makes supplies in the UAE (unless the recipient is obliged to account for VAT under reverse charge mechanism);
- The input tax in respect of any goods or services is subject to a statutory ‘block’ and so would not be recoverable by a taxable person in the UAE; or
- The foreign business is a non-resident tour operator.
The Guide establishes that the first refund application for 2018 can be made from 1 April 2019 and the period for each refund claim shall be a calendar year.
Minimum Claim Amount:
The minimum claim amount which may be submitted shall be AED 2,000 comprising of single and multiple purchases.
The business visitors shall be expected to provide the original tax invoices along with the application for refund, hence the original invoices shall be required to be retained properly.
Alaska Limited is a consultancy business registered in Egypt providing IT training services throughout the world. Recently they conducted training seminars in UAE which resulted in expenses of AED 100,000 and VAT on such expenses amounted to AED 5,000. Their business is registered in Egypt and Egypt provides tax refunds to UAE entities conducting similar consultancy business in Egypt.
In this scenario Alaska Limited has the right to claim refund of the VAT paid to FTA which refund can be claimed from 1st April 2019. The original tax invoice shall also be submitted to the FTA along with the application.
The foreign business claiming tax refund under the business VAT refund scheme should ensure that it does not relate to goods or services for which tax cannot be recovered.
To learn more about the business VAT refund scheme in the UAE, please do not hesitate to contact us.