The UAE Cabinet has adopted a decision to implement the value-added tax (VAT) refund system for tourists later in July 2018, under the new tax refund system non-resident tourists may refund VAT on Purchases made at participating retailers under the new system, provided that such goods are not exempted from the tax system.
On Monday 12th November 2018, a major declaration for refund functionality was issued. Sheikh Hamdan bin Rashid Al Maktoum, Deputy Ruler of Dubai, Minister of Finance, and chairman of the Federal Tax Authority (FTA), set out the implementation dates on Tax refunds for tourist scheme.
From November 18, an overseas tourist may get a refund of the VAT at Abu Dhabi, Dubai, and Sharjah International Airports. The scheme will be extended to other airports and land and seaports in the UAE from December 16.
The tax invoices issued from November 18 to tourists will qualify tourists who are eligible for a tax refund.
Decision No. (2) Of 2018
Decision No. (2) of 2018 states that VAT refund claims shall be provided by retailers.
- Retailers are required to participate in the Tax Refunds for Tourists Scheme on or before 11th November 2018.
- The FTA may collect fees from overseas tourists applying for the tax refund, like, an administrative fee amounting to 15 percent of the VAT amount refunded and a fixed fee of AED4.8 for every claim.
- The scheme operator (registered retailer) will deduct these fees from the total amount to be refunded to the overseas tourist on behalf of the FTA.
- The maximum cash amount that can be returned to a tourist for a 24-hour period is AED 10,000.
- The Decision also stipulates that tax cannot be refunded unless the total value of tax-inclusive purchases is AED 250 or more.
Categories of goods Excluded
Three categories of goods are to be excluded from the Tax Refunds for Tourists Scheme
- Any goods that the overseas tourist does not have with them once leaving the UAE, goods that were entirely or partially consumed in the UAE
- motor vehicles,
- Boats and aircraft.
Procedures to be followed by Retailers
Steps that retailers must follow when a customer asks to make a purchase under the Tax Refunds for Tourists Scheme, including:
- Conducting the necessary due diligence to verify whether the customer is an “overseas tourist” and that they are in the UAE when making the purchase.
- Determining if the supply was made in a period not exceeding 90 days on the date on which the refund claim is requested.
- Retailers must also verify that the customer is 18 years of age or older before issuing them with refund claim.
The first phase of the scheme, which allows tourists to request refunds of the VAT incurred on their purchases, will see the digital system implemented at Abu Dhabi, Dubai, and Sharjah International Airports.
The Tax Refund for Tourists Scheme is applied once tourists leave the UAE, and visitors will receive 80% of their refunds through a special device at the departure port by submitting the tax invoices for their purchases.
Once these documents are submitted, tourists can either recover the VAT- in cash, in UAE dirhams, or have it transferred to their credit card.
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