VAT Refund Services in UAE
The value-added tax was introduced in the United Arab Emirates (UAE) in January 2018, when it was implemented. Many businesses and individuals in the United Arab Emirates are now required to comply with VAT regulations, in which they pay VAT on goods and services. However, many may not know that they would be eligible for a refund of VAT, which enables them to recover a significant portion of their VAT expenses. VAT refund services in UAE are an essential tool for businesses and individuals to guide them through the complex process of VAT refunds, ensuring they obtain the refunds they are legally entitled to.
What is VAT Refund in UAE?
VAT refund in the United Arab Emirates is a means by which people or an enterprise can recover Value Added Tax (VAT) payable on goods and services. These measures are aimed at retrieving tax from tourists, business ventures outside the UAE borders, and particular types of individuals which helps boost tourism and supports the country's reputation in terms of shopping.
What are the Eligibility Criteria for VAT Refund in UAE
Eligibility for claiming VAT refund is different and depends on the category of the claimant:
- Tourists: The visitor should be minimum 18 years old; the goods must be taken from the retailers participating in 'Tax Refund for Tourists Scheme'; the goods should be taken out from the UAE; and the goods should not have been consumed inside the country.
- Businesses: Businesses registered outside the UAE can claim a refund of VAT paid during their activities in the UAE. The claimant must prove payment and fulfill certain documentary requirements.
- Citizens of the UAE Building New Homes: Citizens can recover VAT on the cost of building their own homes.
What are the types of VAT Refunds Available in the UAE?
- Tourist Refund: Tourists can claim back VAT paid on eligible purchases during their stay in the UAE. For this, they need to present tax invoices and tax-free tags at the validation points before leaving the country.
- Business Refund: Businesses registered outside the UAE are eligible to claim VAT on expenses incurred for business purposes while conducting business in the UAE. This includes goods and services purchased for business purposes.
- New Residences Built by Emirati Citizens: They are entitled to VAT refunds on construction costs based on specific guidelines issued by the Federal Tax Authority.
- Special Schemes: Refund schemes may also be applicable for foreign governments, international bodies, and diplomatic missions under their respective agreements with the UAE government.
What are the Benefits of VAT Refund Services in UAE?
- VAT Paid on Business Expenses Returned: The most prominent advantage for businesses in the UAE by using the VAT refund services is that such services allow companies to receive back VAT paid on applicable expenses. Recovering those VAT amounts substantially reduces cost operations, so companies would be able to reinvest those funds in business activity, thus increasing overall profitability.
- Higher Cash Flows and Lower Costs: By recovering VAT, companies are going to increase their cash flows. This is highly essential for startups and small-sized enterprises as they can get into cash constraints at a time. The process of recovery helps in removing financial burden that arises in terms of VAT payment, hence improving the management of company budget and decreasing the costs in operations.
- Compliance with UAE VAT Laws and Regulations: The use of VAT refund services ensures that the companies do not breach the laws of UAE VAT. A company avoids the penalties and legal issues related to the breach of the laws through the proper procedures of VAT refund claims. It brings transparency and accountability within the company.
- Improved Financial Control and Planning: It further ensures better financial planning and management, as businesses will better anticipate their cash flows to understand when they would expect their VAT refunds and consequently take better decisions for their investments and expansions and all sorts of financial commitments.
Who is Qualified for VAT Refund in UAE?
Businesses registered for VAT in the UAE
Businesses that are registered for VAT in the United Arab Emirates are qualified to receive refunds on input VAT incurred from their operations. This can include foreign businesses that may not have a fixed establishment in the UAE but that have incurred VAT on allowable expenses while conducting business activities.
Tourists and visitors of the UAE
Tourists in the UAE can also enjoy VAT refunds on purchases made during their stay, provided they meet certain conditions. These include making purchases from participating retailers and ensuring that goods are exported out of the country without being consumed locally.
Eligible expenses for VAT refund include:
- Goods: Purchases made from retailers participating in the "Tax Refund for Tourists Scheme" or other qualifying vendors.
- Services: Certain services relating to business operations may also be eligible for a refund.
- Imports: Businesses importing items into the UAE may recover VAT paid on such imports if they qualify.
To claim a VAT refund in the UAE, businesses and individuals must follow the Federal Tax Authority (FTA) process through the EmaraTax online portal. Here’s a streamlined guide:
Step 1: Log in to EmaraTax
- Access your account: Use your credentials or UAE Pass to log in to EmaraTax.
- If you don’t have an account, sign up by clicking the "Signup" button.
- Upon login, you will be redirected to the User Dashboard.
- Navigation: Ensure that your user type is set to Taxable Person before proceeding. Alternatively, you can select options like Tax Agents or Special Refunds if applicable.
Step 2: Request the VAT Refund Form
- In the left sidebar, select the VAT Module.
- Click "New" to create a VAT refund request.
- Previous refund requests (e.g., VAT 311 refunds) are visible in this section.
- Initiate the process by clicking New Refund Request and confirming the guidelines and terms.
Step 3: Fill in VAT Refund Details
- Refund Amount: Enter an amount that is less than or equal to the "Excess Refundable VAT Amount."
- Supporting Details:
- Click "Download Template," fill it out, and upload the completed version.
- Provide VAT supply details, contact information, and relevant documents.
- Transaction Details: Add and save all necessary transaction details.
Step 4: Review and Submit
- Review all sections carefully.
- Submit the request after accepting the terms and conditions.
- Note the application number for future reference.
Post-Submission Correspondence
- Upon submission, the FTA will send:
- Acknowledgments
- Approval or rejection notifications
- Additional information requests (if needed)
- Download acknowledgments and certificates from the correspondence section on EmaraTax.
Fields in the UAE VAT Refund Form
The fields mentioned below are all part of the VAT Refund Form (Form VAT311) used by businesses registered for VAT in the UAE to claim refunds for excess input tax. Here's a detailed explanation of each field:
- Tax Registration Number (TRN): This number is like your company's special ID given by the Federal Tax Authority (FTA) when you register for VAT. Make sure it's correct for your business.
- Total Amount of Excess Refundable Tax (in AED): This shows how much VAT you've paid on things you bought, which is more than what you got from selling your goods/services (input tax more than output tax). The FTA calculates this based on your previous VAT returns, minus any penalties you owe (except for late registration).
- The Amount You Wish to Have Refunded (in AED): Here, you write down the exact amount you want back from the excess VAT you paid (mentioned in point 2). Remember, you can't ask for more than what's shown in point 2.
- Remaining Amount of Eligible Excess Refundable Tax (in AED): After you ask for a refund (mentioned in point 3), this shows how much excess VAT you still have left that you can ask for in the future. It's like a balance you can claim later.
- Late Registration Penalty Amount (in AED): If you registered for VAT after the deadline and got a penalty, this field shows how much you owe. If you paid it already, it will show "Zero (AED)."
- Authorized Signature and Declaration: This part has spaces for
- The name of the person in your company who's allowed to sign the form (in English & Arabic).
- A place for that person to physically sign the form.
- A statement saying you agree to give more documents if the FTA asks to check your refund claim.
Updating Bank Details for VAT Refund Requests
- Navigate to your dashboard and locate applications with the status "Payment Failed."
- Update bank details via the ellipsis menu:
- Enable editing, modify fields, upload required documents, and proceed.
- Reapply for the refund following the original steps.
| Status |
Explanation |
| Pending |
Once the details are submitted, the form transitions to this status while awaiting processing by the Federal Tax Authority (FTA). |
| In Progress |
The FTA has begun reviewing the refund application. |
| Resubmit |
The FTA requires additional information or documentation. Details of the required action are sent to the authorized signatory's email. The tax registrant must respond within five (5) working days with the necessary updates. |
| Reviewed |
The refund application has been reviewed, and the FTA has initiated payment of the VAT refund to the taxable person's bank account. |
| Approved |
After successful receipt of the VAT refund amount by the taxable person’s bank account, the status changes to "Approved." |
| Rejected |
If the refund application is denied, the status changes to "Reject," indicating the application did not meet the FTA’s requirements. |
- Validation Letter of Bank Account: Name of account holder, bank details (SWIFT/BIC, IBAN).
- Supporting Evidence: Proof of payment for excess credit claims or transfers from another TRN.
- Tax Invoices: The top five tax bills from standard-rated purchases and other relevant invoices.
- VAT Refund Form: It is a downloadable form at EmaraTax.
Timeline and Expected Processing Time for VAT Refund
- First Review: FTA will first review an application submitted within 20 business days.
- Notification of Decision: Applicants are given a response regarding acceptance or rejection within this time.
- Refund Processing: After approval, refund is processed and credited usually within the next 5 business days.
What are the Common Mistakes in VAT refund applications?
- Mistakes in filling out the application can lead to delays or rejections. Common errors include incorrect amounts, missing information, or failing to follow instructions.
- Submission of incomplete applications or missing necessary documentation may delay the refund process. This could lead to return requests for corrections or other supporting information.
- Processing times may vary, and extraordinary delays can emerge considering that there is a great volume of submitted applications or other reviews needed by the FTA.
Why Need a Professional VAT Refund Services in UAE?
- The professional VAT refund services are familiar with UAE VAT laws and regulations in great detail and assure full compliance and accuracy.
- VAT Refund process to be completed effectively in timely and efficient manners
- Professional VAT refund services reduce the risk of error and penalties while ensuring that your activities comply with the rules and regulations of UAE VAT.
- Professional VAT refund services ensure that you obtain the maximum VAT refund amount so that your cash flow and profitability will be maximized.
Conclusion
VAT refund services are very important for the UAE, as it allows businesses and individuals to gain the maximum refund possible for which they are entitled. Individuals and businesses can make less risk of error and penalty through professional VAT refund services such as Reyson Badger, in turn maximizing cash flow and profitability. With the change in laws and regulations surrounding VAT in the UAE, businesses and other individuals should make sure they always comply and look for reputed VAT refund services. With that being said, those looking to use VAT refund service in the UAE must exercise thorough research on a provider, scrutinize all their relevant experience, or reputation, before finally making such a very important selection.
