The United Arab Emirates (UAE) introduced Value Added Tax (VAT) on January 1, 2018, as part of its initiative to diversify the economy away from oil dependency. VAT is set at a standard rate of 5% on most goods and services, making it one of the lowest rates globally. However, certain goods and services, such as international transportation, healthcare, and education, may be zero-rated. The VAT refund scheme allows eligible tourists, business visitors, and UAE nationals building new residences to reclaim VAT, providing a financial relief opportunity.

Who is Eligible for VAT Refunds in UAE?

For Tourists

Tourists visiting the UAE can reclaim VAT on eligible purchases made during their stay. To qualify, you must be a non-resident, meaning residents are not eligible. Tourists must meet specific conditions, including:

• Non-Residency: Tourists must be non-residents of the UAE. GCC nationals who are not residing in the UAE are also eligible, but UAE nationals studying abroad may face restrictions.
• Age Requirement: Tourists must be at least 18 years old and not a crew member on a flight or vessel departing from an implementing state.
• Retailer Participation: Purchases must be made from retailers that are part of the "Tax Refund for Tourists Scheme."
• Minimum Purchase Amount: The total purchase amount must be at least AED 250.
• Goods Not Consumed: Items must not be consumed, either fully or partially, within the UAE. Certain goods, such as motor vehicles, boats, aircraft, and services, as well as goods not in possession upon departure, are excluded from the refund scheme.

For Business Visitors

To qualify for a VAT refund as a business visitor, you must meet specific eligibility criteria set by the UAE’s Federal Tax Authority (FTA). Only foreign businesses that do not have a place of establishment or fixed establishment in the UAE or an Implementing State can apply. Additionally, the business must not be registered as a taxable person in the UAE and should not be conducting business activities within the country.

Eligibility Criteria:

• No Establishment in UAE or Implementing State: The foreign business must have no physical or fixed establishment in the UAE or any state implementing a VAT law as per GCC agreements.
• Non-Taxable in UAE: The entity should not be a taxable person in the UAE.
• Not Conducting Business in UAE: The business should not engage in ongoing or regular business activities within the UAE.
• Registered as a Business: The entity must be recognized and registered as an establishment with a competent authority in its home country.

For UAE Nationals Building New Residences

UAE nationals constructing new residences are eligible for VAT refunds on specific expenses related to the building. This refund applies to VAT paid on goods and services directly related to the new home's construction but excludes items like furniture and appliances.

Types of VAT Refunds

Tourist VAT Refunds

The VAT refund process for tourists is facilitated by Planet Tax-Free, the exclusive operator of the VAT refund system for tourists in the UAE. The process involves obtaining a Tax-Free form at the point of purchase, validating documents at the airport or exit points, and selecting a refund method—cash, credit card, or digital wallet.

Business VAT Refunds

Businesses can claim VAT refunds through the EmaraTax portal, an online service provided by the UAE government. The process involves creating a Taxable Person Account, completing and submitting a refund form, providing necessary documentation (e.g., tax invoices, proof of export), and adhering to deadlines. Each VAT refund claim must cover a complete calendar year.

Related Guide: VAT Refund for Business Visitors in UAE

Step-by-Step Guide to Claim VAT Refund in UAE

For Tourists

1. Shop at Participating Retailers: Ensure the retailer is part of the Tourist VAT Refund Scheme and request a Tax-Free form at checkout. Provide identification documents, such as a passport, to verify eligibility.
2. Receive a Tax-Free Form and Tag: The retailer will issue a digital Tax-Free form and attach a 'Tax-Free' tag to your sales receipt. Double-check that your details are correctly entered into the Planet system before leaving the store.
3. Validate Your Purchases at Departure Points: At the airport, locate the VAT refund validation counters or self-service kiosks operated by Planet Tax-Free. Present the necessary documents, including the Tax-Free form, original invoices, passport, and the purchased items.
4. Choose Your Refund Method: After validation, you can opt for a cash refund, credit card refund, or digital wallet transfer. Cash refunds are limited to AED 10,000 per day and AED 35,000 per trip. Exceeding this amount will result in the additional refund being processed to a credit or debit card.
5. Collect Your Refund: Depending on your chosen refund method, the refund will be processed within a few days. For credit card and digital wallet options, expect the funds within nine days of validation.

For Business Visitors

1. Login to the EmaraTax Portal: Access the EmaraTax portal and make an account. From the dashboard, navigate to VAT services and select "New Refund Request."
2. Fill Out the Refund Form: Provide required details such as your business’s bank account information, total refund amount, and the relevant period for the claim. Ensure the refund amount requested does not exceed the eligible refundable VAT.
3. Upload Supporting Documents: Attach scanned copies of tax invoices, proof of payment, and any other relevant transaction documents. Ensure that all entries are accurate and complete to avoid delays.
4. Submit the Refund Request: Review all information carefully before submitting. After submission, you will receive an application number for tracking purposes.
5. Receive Your Refund: The Federal Tax Authority will review your request, and if approved, the refund will be processed within 5 to 7 business days, directly credited to your business’s bank account.

Documents Required for VAT Refund

To ensure a smooth refund process, both tourists and businesses must have the necessary documentation:

For Tourists

• Original tax invoices from purchases.
• Valid passport and boarding pass.
• Tax-Free form and ‘Tax-Free’ tags from participating retailers.

For Businesses

• Original hard copies of all invoices.
• Tax Compliance Certificate.
• Tax Invoices with Proof of Payment.
• Authorized Signatory Documentation.

Maintaining proper documentation is critical to avoid rejections or delays in the refund process. Businesses should regularly audit their VAT records to ensure compliance and accuracy.

Common Challenges and How to Overcome Them

The VAT refund process, while straightforward, can present challenges:

• Documentation Errors: Incomplete or incorrect documentation is a common issue. Double-check all forms and documents before submission.
• Validation Delays: During peak travel times, validation points at airports can become congested. Arrive early to allow ample time for processing.
• Online Submission Issues for Business Visitors: Errors in online submissions, such as incorrect data entries or missing documents, can lead to rejections. Use the EmaraTax portal's guidance and seek professional assistance if needed.

Deadlines and Timelines for VAT Refunds

Meeting deadlines is crucial for successful VAT refund claims:

• Tourists: Refund claims must be made within 90 days of the purchase date. Ensure that all validations and submissions are completed before departing the UAE.
• Businesses: Each VAT refund claim must cover a complete calendar year. The requirement for a full calendar year claim does not apply to businesses or applicants residing in GCC States that are not considered Implementing States under the UAE VAT legislation. This exemption allows more flexibility for businesses in these states when applying for refunds.

Important Tips for Maximizing VAT Refunds

• Check Retailer Participation: Not all retailers participate in the Tourist VAT Refund Scheme. Always confirm before making purchases.
• Keep All Documentation Organized: Misplaced invoices or missing forms can result in lost refunds. Use digital tools or folders to keep all documents neatly filed.
• Understand Eligibility Criteria: Both tourists and businesses must meet specific criteria for refunds. Regularly review eligibility guidelines to ensure compliance.

Frequently Asked Questions

• Can I get a VAT refund on online purchases? VAT refunds generally do not apply to online purchases, as these often involve goods consumed or used within the UAE.
• What happens if I miss the validation at the airport? Missing the validation step can result in losing the opportunity to claim your VAT refund. Always allocate sufficient time at the airport.
• How soon will I receive my VAT refund? Refunds are usually processed within 5 to 7 business days for businesses and 9 days for tourists choosing credit card or digital wallet refunds.

Conclusion

Understanding the VAT refund process in the UAE can significantly enhance your shopping or business experience by providing substantial financial savings. Tourists can enjoy more value from their purchases, while businesses can improve cash flow by recovering excess VAT. Always ensure compliance with the outlined steps, maintain accurate records, and stay informed of eligibility criteria to make the most of the UAE's VAT refund schemes. Whether you're a shopper looking for tax-free deals or a business managing VAT efficiently, the UAE offers robust systems to support your needs.