Recovering VAT in the UAE: Key Points on VAT Refunds

Value Added Tax (VAT) was introduced in the United Arab Emirates (UAE) in 2018 at a standard rate of 5%. While businesses and individuals are required to pay VAT on goods and services, the UAE provides a structured process for eligible businesses and tourists to reclaim VAT under specific conditions. In this blog, we will discuss the eligibility criteria for VAT refunds, the refund process, and the documentation required to successfully recover VAT in the UAE.

Who Can Claim a VAT Refund in the UAE?

VAT refunds are available for businesses, tourists, and UAE nationals under different conditions. Understanding the eligibility criteria is essential to ensure compliance with Federal Tax Authority (FTA) regulations.

1. VAT Refund for Businesses

Businesses that meet specific VAT conditions can claim VAT refunds on their taxable purchases. Refund eligibility includes:

• VAT-registered businesses: Companies registered under the UAE VAT system can reclaim input VAT paid on business-related purchases.

• Foreign businesses with no UAE presence: Companies that are not UAE-based but operate under reciprocal tax agreements can apply for a VAT refund.

• Entities operating in designated Free Zones: Businesses in specific Free Zones (Designated Zones) may be eligible for VAT recovery, depending on their supply structure.

2. VAT Refund for Tourists

Tourists visiting the UAE can reclaim VAT on purchases made during their stay under the Tourist VAT Refund Scheme. To be eligible:

• The tourist must not be a UAE resident.

• The purchases must be made from FTA-registered retailers offering VAT refunds.

• The goods must be exported from the UAE within 90 days from the date of purchase.

3. VAT Refund for UAE Nationals (Home Construction)

UAE Nationals constructing new residential properties can reclaim VAT paid on construction-related expenses. To qualify:

• The property must be for personal residential use.

• The VAT refund applies to construction services, building materials, and consulting fees.

• The refund request must be submitted to the FTA with supporting documents.

##Step-by-Step Process for VAT Refund in the UAE The VAT refund process varies depending on who is applying—businesses, tourists, or UAE nationals. Below is a breakdown of the process for each category.

1. VAT Refund Process for Businesses

Businesses seeking VAT refunds must follow these steps: 1. File a VAT Return:

• Submit a VAT return through the FTA’s e-Services portal.

• Ensure that input VAT (VAT paid on business expenses) is correctly reported.

2. Request a VAT Refund:

• If the input VAT is higher than the output VAT, the business can apply for a refund.

• Log into the FTA online portal, navigate to the VAT refund section, and submit the request.

3 .FTA Review and Approval:

• The FTA will review the application and may request additional supporting documents.

• If approved, the VAT refund will be processed within 30 to 45 business days.

4. Receive VAT Refund:

• The refunded amount will be transferred to the business’s registered UAE bank account.

2. VAT Refund Process for Tourists

Tourists can reclaim VAT using the "Tax-Free Shopping" system, which is managed by Planet Payment, an FTA-approved operator. 1. Shop at VAT-Registered Retailers:

• Ensure that the store is part of the Tax-Free Shopping Program (look for the "Tax-Free" sign).

• Request a Tax-Free Purchase receipt when buying goods.

2. Validate Your Purchase at the Airport:

• Before departure, visit the VAT Refund counters at Dubai International Airport, Abu Dhabi Airport, or other UAE exit points.

• Provide passport, boarding pass, original receipts, and the purchased goods for validation.

3. Choose a Refund Method:

• Refunds can be credited to a credit/debit card or received in cash at approved locations.

3. VAT Refund Process for UAE Nationals (New Homes)

UAE Nationals constructing new homes can apply for a VAT refund through the FTA portal: 1. Gather Required Documents:

• Emirates ID and passport copy.

• Proof of property ownership and construction permits.

• Invoices and receipts for VAT-related construction costs.

2. Submit the Application:

• Apply via the FTA online system under the "VAT Refund for UAE Nationals" section.

3. FTA Review and Refund Processing:

• The FTA will evaluate the application and process the refund within 30 to 60 days.

Required Documents for VAT Refund Claims

To successfully claim a VAT refund, applicants must submit accurate documentation to the FTA.

For Businesses:

• VAT return submission records

• Tax invoices for VAT-paid purchases

• Bank account details for refund processing

• Import/export documentation (if applicable)

For Tourists:

• Original purchase receipts with VAT details

• Passport and valid travel visa

• Boarding pass or flight itinerary

• Goods purchased (for verification at the airport)

For UAE Nationals (Home Construction):

• Emirates ID and passport copy

• Proof of property ownership

• Invoices and receipts for construction services

Common Reasons for VAT Refund Rejection and How to Avoid Them

1. Incorrect VAT Documentation

• Issue: Businesses and individuals often submit incomplete or inaccurate invoices.

• Solution: Ensure that invoices contain VAT registration numbers, supplier details, and correct VAT amounts.

2. Missing Tax Returns (for Businesses)

• Issue: Businesses that fail to submit VAT returns cannot claim refunds.

• Solution: Regularly file VAT returns before the deadline and ensure proper reporting.

3. Invalid Tourist Refund Claims

• Issue: Tourists attempting to claim VAT refunds after leaving the UAE.

• Solution: Validate purchases before departure at designated VAT refund counters.

How Young and Right Can Help

VAT refund processes can be complex, requiring proper documentation and compliance with FTA regulations. At Young and Right, we specialize in helping businesses, tourists, and UAE nationals successfully reclaim VAT refunds with ease.

1. VAT Refund Assistance for Businesses

• Preparing VAT refund applications and submitting them to the FTA.

• Ensuring accurate VAT reporting and compliance with refund criteria.

• Assisting with VAT audits and dispute resolution if a refund is delayed or rejected.

2. VAT Recovery Services for Tourists

• Guiding tourists on how to collect VAT-refunded receipts.

• Providing assistance with validating purchases before airport departure.

3. VAT Refund Support for UAE Nationals (New Homes)

• Helping UAE Nationals prepare required documentation for VAT claims.

• Submitting VAT refund requests efficiently through the FTA portal.

4. Ongoing VAT Compliance and Support

• Keeping businesses updated on new VAT refund regulations.

• Providing long-term VAT consultancy for tax efficiency.

Conclusion

VAT refunds in the UAE offer businesses, tourists, and UAE Nationals a way to recover VAT on eligible purchases. However, proper compliance with FTA regulations, accurate documentation, and adherence to VAT refund timelines are essential to avoid delays or rejections. At Young and Right, we simplify the VAT refund process, ensuring seamless compliance and maximum refund benefits. Contact us today to streamline your VAT recovery process and optimize tax efficiency in the UAE.