Common Reasons Why VAT Refund Applications Get Rejected (And How to Avoid Them)

Applying for a VAT refund in Dubai can help businesses recover input VAT on eligible expenses. However, many refund applications get rejected due to errors, missing documentation, or non-compliance with UAE tax laws. This guide highlights the most common reasons why VAT refund applications get rejected and provides expert tips on how businesses can avoid these mistakes to ensure a smooth refund process.

Understanding VAT Refund Rejections

The Federal Tax Authority (FTA) is responsible for reviewing and processing VAT refund applications in Dubai. If a refund application does not meet the FTA’s criteria, it is likely to be rejected, causing delays or financial losses for businesses. Some of the most common reasons for rejection include:

• Incorrect or incomplete documentation

• Claiming VAT on non-refundable expenses

• Late VAT return filings

• Errors in VAT refund amount calculations

• Bank account mismatch issues

• Inconsistent information across documents

• Failure to respond to FTA requests for additional information

1. Incorrect or Incomplete Documentation

Reason for Rejection

One of the most common reasons VAT refunds are denied is due to missing, incomplete, or incorrect documents.

• Tax invoices do not meet FTA requirements (e.g., missing supplier VAT number, incorrect VAT amount, or missing invoice date).

• Lack of proof of payment (e.g., missing bank statements or receipts).

• Invoices not issued in the business's name (expenses must be under the VAT-registered entity).

How to Avoid This Issue

• Ensure all invoices are valid and contain required details, including:

Supplier’s VAT registration number Date of invoice issuance Clear breakdown of VAT charged

• Keep proper financial records and maintain digital backups of all invoices and receipts.

• Submit supporting documents, such as bank statements showing proof of payment.

2. Claiming VAT on Non-Refundable Expenses

Reason for Rejection

Not all expenses are eligible for a VAT refund. Businesses often wrongly claim VAT on non-refundable expenses, leading to rejection.

• VAT-exempt or zero-rated expenses (e.g., residential property rent, certain financial services).

• Personal and entertainment expenses (e.g., employee meals, client gifts, hotel stays unrelated to business operations).

• Non-business-related expenses (e.g., VAT paid on services not directly linked to taxable business activities).

How to Avoid This Issue

• Review the VAT refund eligibility criteria before submitting a claim.

• Ensure the VAT claimed is linked to taxable business activities (e.g., commercial property rent, business-related supplies).

• Use a VAT expert to conduct a pre-application review of claimed expenses.

3. Late VAT Return Filings

Reason for Rejection

A business must file its VAT returns on time before applying for a refund. If VAT returns are not submitted, are late, or contain discrepancies, the refund application will be rejected.

How to Avoid This Issue

• File VAT returns before the due date (usually by the 28th of each tax period).

• Ensure VAT returns are accurate and reflect correct input and output VAT values.

• Check VAT return submission status on the FTA portal before submitting a refund claim.

4. Errors in VAT Refund Amount Calculation

Reason for Rejection

Businesses often make calculation errors when entering the VAT refund amount in their application. Common mistakes include:

• Claiming more VAT than paid (e.g., input VAT claimed exceeds the amount on invoices).

• Incorrect tax rate applied (VAT is charged at 5%, but incorrect rates may be used in calculations).

• Omitting some eligible VAT amounts due to poor record-keeping.

How to Avoid This Issue

• Double-check VAT calculations before submitting the refund form.

• Use accounting software to automate VAT calculations and reduce manual errors.

• Review previous VAT returns to ensure consistency between refund claims and declared VAT.

5. Bank Account Mismatch Issues

Reason for Rejection

If the business provides incorrect or mismatched bank details in the VAT refund application, the FTA will reject the request.

• Bank account name does not match the business name registered with the FTA.

• Incorrect IBAN number or bank details provided.

• Business has not updated banking information in the FTA portal.

How to Avoid This Issue

• Ensure the bank account details match the business’s FTA-registered name.

• Double-check the IBAN number and bank details before submission.

• Update banking information in the FTA portal if there are any changes.

6. Inconsistent Information Across Documents

Reason for Rejection

The FTA cross-verifies details across multiple documents (e.g., VAT returns, refund applications, invoices, and financial statements). If inconsistencies are found, the refund claim may be denied.

• VAT amounts on refund applications do not match VAT returns.

• Different business names, addresses, or TRNs on invoices compared to FTA records.

• Inconsistent VAT treatment in previous filings.

How to Avoid This Issue

• Verify that all documents align with the information in the FTA portal.

• Check previous VAT returns and ensure consistent reporting.

• Consult a VAT expert for a compliance review before submitting the refund request.

7. Failure to Respond to FTA Requests for Additional Information

Reason for Rejection

During the review process, the FTA may request additional documents or clarifications regarding the refund claim. If the business fails to respond within the specified timeframe, the application will be rejected.

How to Avoid This Issue

• Regularly monitor the FTA portal and registered email for updates or requests.

• Submit requested documents within the deadline to avoid automatic rejection.

• Maintain organized financial records to provide supporting documents when required.

How Young and Right Can Help

Many businesses struggle with VAT refund rejections due to minor errors, missing documentation, or compliance issues. Young and Right offers expert VAT advisory services to help businesses avoid these common mistakes and maximize their VAT refunds.

1. VAT Refund Application Review

• Pre-submission review to identify potential errors.

• Verification of VAT refund calculations for accuracy.

• Cross-checking VAT returns and refund claims for consistency.

2. Documentation Assistance

• Ensuring invoices meet FTA standards.

• Compiling supporting documents for smooth refund approvals.

• Organizing financial records to avoid future issues.

3. Compliance and Audit Support

• Ensuring VAT returns and refund claims align with FTA regulations.

• Responding to FTA requests for additional information.

• Managing VAT refund applications to prevent unnecessary delays.

4. Ongoing VAT Compliance Services

• Regular compliance checks to prevent VAT refund rejections.

• Assistance in filing accurate VAT returns on time.

• Guidance on VAT planning and tax-efficient business strategies.

With Young and Right, businesses can ensure a seamless VAT refund process, avoid rejection, and receive their refunds efficiently.

Conclusion

VAT refund applications in Dubai often get rejected due to documentation errors, ineligible claims, late filings, and calculation mistakes. By understanding the common reasons for rejection and implementing best practices, businesses can increase their chances of approval and recover VAT smoothly. For businesses seeking expert assistance, Young and Right offers comprehensive VAT refund services, ensuring full compliance with UAE tax laws and maximizing refund success rates.