visaprocessUAE: VAT

VAT refund to tourists came into effect on November 18, 2018.
Daily maximum VAT refund for tourists has been capped at Dh10,000 in cash. But if the refund claim exceeds that amount, then the funds will be transferred electronically to the tourist.

Most of the VAT refund to tourists will be from purchases of gold jewellery, electronics and luxury goods.

The total value of tax inclusive purchases from the retailer must amount to a minimum of Dh250 to be eligible for a refund. Tourists will not receive the full 5 per cent VAT because the refund is limited to 85 per cent of the VAT amount paid to the retailer.

Retailers must pass credit check and continuously settle tax payments and submit VAT returns to be eligible for the refunds.
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WHAT IS A VALUE-ADDED TAX?
It is essentially a tax on consumption, and happens at nearly every level of transaction. The actual VAT percentage can vary between countries, with Saudi Arabia now opting to go for 15 per cent while the UAE sticks to 5 per cent.

The VAT component someone pays is judged on the cost of the product, but minus the cost of materials used in making it and which have already been taxed.

On January 1, 2018, the UAE and Saudi Arabia became part of the network of countries to have introduced VAT. Currently, some form of VAT is in place at more than 160 countries.
----------------------------------------- VAT refund: 4 conditions for UAE retailers to register in system
The Federal Tax Authority (FTA) on Saturday announced four conditions for retailers to register in the digital system of the Tax Refund Scheme for Tourists, which will come into effect as of the fourth quarter of this year.

The FTA set condition that the retailer must be registered with the FTA and have a tax registration number (TRN); the supplier's sales of goods must not be excluded from the refund scheme; the retailer must submit a request to participate in the Scheme as determined by the FTA; and finally, the retailer must meet the financial credit requirements specified by the system operator and be committed to submitting Tax Returns and paying due taxes regularly.

The Authority is implementing the Scheme in cooperation with Planet.

In a press statement issued today, the Federal Tax Authority cautioned that a retailer's membership in the Tax Refund Scheme for Tourists would be revoked if they fail to meet their obligations, whether those stated in tax laws or in the contract between the system operator and the retailer.

Khalid Ali Al Bustani, director-general, Federal Tax Authority, asserted that the past few days witnessed a great demand for registration in the Tax Refund Scheme for Tourists.

"The system operator will coordinate between retailers registered in the tax system and wishing to register for the Scheme, connecting them with ports of entry and exit all around the UAE," he explained.

"This, in turn, allows tourists who are eligible for a tax refund - as per the terms and conditions of the Cabinet Decision - to request a refund for taxes incurred on their purchases through a state-of-the-art digital system."

He said Planet will make agreements with retailers to equip them with the technologies needed to be part of the Scheme, which link these business to the digital systems of the Federal Tax Authority, as well as airports and land and sea ports. The Scheme creates designated places for tourists to apply for a tax refund and easily recover the eligible refundable amounts, which will be accurately calculated through the advanced digital system.

The FTA is hosting a meeting on September 25 in Ajman in an effort to maintain direct and constant communication with businesses, and introduce them to the terms and conditions for registering in the Tax Refund Scheme for Tourists, Al Bustani added.

"We have seen strong enthusiasm from retailers, outlets and shops across the UAE to register for the scheme, and look forward to seeing registrations grow," said Gary Byrne, director of Worldwide Strategic Partnerships & New Markets at Planet.

Nimish Goel, partner, WTS Dhruva Consultants, said in line with the best global practices, the UAE has also adopted a key measure to allow refund of VAT to international tourists. However, the key shall be the implementation i.e. educating as well as on boarding retailers and an efficient mechanism to grant refunds to tourists.
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