VAT refund system for tourists in final stages

The system operator will coordinate with retailers registered with the FTA following last weeks approval by the UAE Cabinet.

On Saturday, the UAE’s Federal Tax Authority (FTA) announced that a system to return Value-Added Tax (VAT) to tourists is nearing its final stages of preparation and will correspond with international best practices.

The new system relies on an advanced integrated digital system to set up a direct connection with points of sale as well as with all ports of entry into the UAE. This allows the global operator to coordinate directly with retailers registered with the FTA enabling tourists to submit refund requests for their purchases at the point of sale.

Last week, the UAE Cabinet approved the VAT refund system for tourists following the introduction of 5 per cent VAT on all goods and services back in January. At this point in time, it remains unclear as to which global operator will be responsible for the overall system.

According to the Director of the FTA, the system operator will be the one responsible for signing agreements with retailers and providing them with the necessary technology to connect with the FTA, airports and land and seaport entries into the UAE. New designated areas will be placed at all ports of entry into the UAE where tourists can easily reclaim taxes. At these areas, the new digital system will determine the taxes that are eligible for a refund which will then be automatically reimbursed to tourists. This strategy complements the UAE governments commitment to implementing a UAE tax system that is in line with global standards and best practices.

Intention to leave the country

As part of the UAE Cabinets announcement last week, a basic set of conditions for tourists to qualify for a tax refund using the new system was outlined. Firstly, the goods in question need to have been supplied to the tourist within the UAE borders. Second, the tourist must have the explicit intention to leave the country within 90 days from the date of supply with the purchased goods. And finally, the goods in question must be exported out of the UAE by the tourist within three months from the date of supply.

The decision also stipulates that for the tax refund to be approved, the tourist must have purchased the goods from a retailer that is registered with the new system and, additionally, the purchase process must be carried out – and the good exported – in line with the requirements determined by the FTA Chairman. The final stipulation outlined is that the goods in question must not be excepted from refund.

The FTA declared that any retailer who meets their requirements are free to register with the system. Once the system is in place, if a tourist chooses to make a purchase with the intention of applying for a VAT refund from a supplier registered with the tax refund system, then it is the supplier’s responsibility to provide them with the necessary documents to do so, namely: a tax invoice that meets all legal requirements. The tourist can then submit the claim directly with the system operator who will then refund them the corresponding amount subject to sufficient evidential documentation being provided.

Source: Gulf News