FTA makes way for foreign firms to reclaim VAT on UAE business
- Foreign companies can recover VAT incurred in the UAE
- Firm must not have a fixed establishment in the UAE
- Firm must not be considered “taxable person” in the UAE
- Firm must be registered with a competent authority in its own jurisdiction
- Firm must be from from a country that reciprocates similar VAT refund
The Federal Tax Authority (FTA) has issued a new guide on “VAT Refunds for Business Visitors” that now permits foreign businesses to reclaim value-added tax (VAT) charges that they have incurred in the UAE, in a move that hopes to increase investments in the UAE.
“This is a welcome move by the Federal Tax Authority in the UAE and will further improve the country’s global competitiveness and support local industries that depend on foreign businesses visiting the region, particularly those focused on the tourism and exhibitions. Once the list of reciprocating countries is made available, we expect to see this initiative positively and visibly impacting the UAE’s economy,” said Mansoor Sarwar, Director of Technical Services and Pre-Sales at Sage Middle East.
The FTA has laid out four conditions that need to be met in order to be eligible for the VAT refund.
The first condition is that “foreign businesses must not have a place of establishment or fixed establishment in the UAE or any of the VAT-implementing GCC states,” the FTA statement said.
Secondly, the tax regulator said, “these foreign businesses must not be a taxable person in the UAE. Third, they must also be registered as an establishment with a competent authority in the jurisdiction in which they are established.”
The FTA also stressed reciprocity as a key fourth condition, whereby businesses seeking a VAT refund must be resident in a country that refunds VAT charges “to UAE businesses in similar circumstances.” The authority is yet to clarify which countries have met this condition and will reciprocate the VAT refund to be deemed eligible.
Procedure of VAT refund applications
The authority also urged businesses seeking to avail of the refund to retain original tax invoices, which will have to be submitted with the refund applications.
In a statement released by the authority, FTA Director-General Khalid Ali Al Bustani noted that the refund procedure would support economic activities in the areas that are popular with visiting businesses, including tourism, trade, exhibitions, and conferences.
The minimum claim amount for each VAT refund submitted by business visitors is set at AED 2,000.
The opening date for accepting refund application for a calendar year from January 1 to December 31 would be March 1st of the following year. However, as an exception, refund applications for the calendar year of 2018 can be made only from April 1, 2019.