In a move aimed at facilitating international commerce, the Federal Tax Authority (FTA) of the United Arab Emirates (UAE) has announced the opening of the VAT refund application window for unfamiliar organizations under the “Foreign Business Refund Scheme,” effective from 1 March 2022. This initiative allows eligible entities to reclaim Value Added Tax (VAT) paid during the 2021 calendar year. The deadline for submitting refund requests is 31 August 2022.
Navigating VAT Refunds: A Guide for Foreign Entities
Understanding the VAT Refund Scheme
Under the Business VAT Refund Scheme, foreign organizations operating in the UAE can seek reimbursement of VAT paid on expenses incurred within the country, subject to certain conditions.
Defining Foreign Businesses
A foreign business refers to any entity registered with a competent authority outside the UAE jurisdiction.
Eligibility Criteria for VAT Refund
Foreign organizations may apply for VAT refund under the Business VAT Refund Scheme if they meet the following criteria:
- Lack of a physical presence or fixed establishment in the UAE or any Implementing State.
- Are not registered as Taxable Persons in the UAE.
- Are not conducting business activities within the UAE, except under Reverse Charge Mechanism (RCM).
- Operate and are registered for VAT in a foreign jurisdiction.
- Belong to a country that offers VAT refunds to UAE entities under similar conditions.
Minimum VAT Threshold
To be eligible for a refund claim under this scheme, the minimum amount of VAT incurred must be AED 2,000.
Exclusions from VAT Refunds
Certain scenarios preclude foreign businesses from availing VAT refunds, including:
- Engaging in supplies within the UAE.
- Inability to recover Input Tax as per FTA regulations.
- Originating from jurisdictions that do not offer reciprocal VAT refunds (excluding GCC registered companies).
- Non-resident tour operators.
Application Process and Timeline
Refund claims are processed over 12 months, except for applicants resident in GCC states that are not Implementing States.
Step-by-Step Guide to VAT Refund for Business Visitors in UAE
- Register with the FTA eServices Portal: Create an account on the FTA portal at eservices.tax.gov.ae.
- Submit Company Details: Enter company information in the registered email portal.
- Complete Refund Form: Fill out the VAT Refund Form accurately.
- Document Submission: Provide all required documents, ensuring they reach the Federal Tax Authority within one month of refund request submission.
- Processing Time: Allow up to four months for the FTA to process the refund application.
- Refund Disbursement: Upon approval, expect the refund to be issued within 10 working days.
Required Documents for VAT Refund
The following documents are essential for submitting a refund request:
- Proof of incorporation in the home country.
- Tax registration certificate from the home country (if applicable).
- Documentation demonstrating exempt or non-business activities in the home country.
- Original tax invoices with proof of payment.
- Copy of the Authorized Signatory’s passport.
- Proof of Authority of the Authorized Signatory.
- Bank account details.
Submission Guidelines
- All documents must be provided in original hardcopy format, accompanied by proof of payment.
- Hard copies of invoices and other relevant documents should be sent to the Federal Tax Authority within one month of the refund request submission, along with a prepaid envelope for return postage.
By adhering to these guidelines and understanding the intricacies of the VAT refund process, foreign businesses can streamline their operations and maximize their financial efficiency when conducting business activities in the UAE.