A Complete Guide to VAT Refund in the UAE by Tulpar Global Taxation

In the UAE, Value Added Tax (VAT) was introduced in 2018, impacting businesses and consumers alike. While VAT is a crucial revenue source for the government, it can sometimes result in businesses paying more VAT on their inputs than they charge on their outputs. Thankfully, the UAE offers businesses the opportunity to claim a VAT refund to recover the excess VAT paid.

In this blog, we will guide you through the VAT refund process, the eligibility criteria, and how Tulpar Global Taxation can assist in ensuring a smooth and efficient VAT refund claim.

1. What is VAT Refund?

A VAT refund is the process through which a business can reclaim the excess VAT it has paid on purchases and expenses over the VAT it has collected from its customers. In essence, VAT refunds allow businesses to offset their input tax against their output tax, which helps improve cash flow and reduce financial burden.

For example, if a business has paid VAT on purchases (input tax) that is higher than the VAT it has collected on sales (output tax), the business may be eligible to claim a refund from the Federal Tax Authority (FTA).

2. Who is Eligible for VAT Refund?

Certain businesses and individuals can apply for VAT refunds under specific circumstances. Here are the key categories:

a. Businesses With Input VAT Exceeding Output VAT

Businesses that incur more VAT on their purchases (input VAT) than the VAT they collect from customers (output VAT) are eligible to claim a refund. This situation often arises in the following cases:

• Businesses that are in a startup phase and do not yet have sufficient sales to offset their input tax.
• Businesses that export goods and services or deal with exempt or zero-rated items, as these may result in higher input VAT.

b. Non-Resident Businesses

Foreign businesses that incur VAT on certain expenses in the UAE may also be eligible for VAT refunds. This typically applies to non-resident businesses that are involved in activities like trade shows, exhibitions, or conferences held in the UAE.

c. Tourists

Tourists visiting the UAE can also claim VAT refunds on eligible goods purchased during their stay. These refunds are processed through the Tax Refund for Tourists Scheme, which allows travelers to recover VAT paid on goods that they will export from the UAE.

3. Types of VAT Refunds Available in the UAE

The UAE provides three primary categories of VAT refunds:

a. VAT Refund for Businesses

Businesses that have overpaid VAT on purchases can apply for a VAT refund. This may occur if:

• The business has paid VAT on goods or services that it has not yet sold.
• The business is in a loss-making position and has incurred higher input tax than output tax.

b. VAT Refund for Foreign Businesses (Non-Residents)

Foreign businesses that are not registered for VAT in the UAE can also claim VAT refunds. The criteria for foreign businesses include:

• They must not have any permanent establishment in the UAE.
• The VAT paid must be related to business activities that are conducted in the UAE.

c. VAT Refund for Tourists

Tourists who visit the UAE can claim VAT refunds on their shopping purchases. The goods purchased must be taken out of the UAE within 90 days from the date of purchase and meet certain criteria outlined in the Tax Refund for Tourists Scheme.

4. How to Apply for VAT Refund in the UAE

The process of applying for a VAT refund depends on the category of refund you are claiming. Let’s break down the steps for businesses and tourists:

a. For Businesses

The process for businesses to claim a VAT refund involves the following steps:

1. Ensure Eligibility: First, confirm that your business meets the eligibility criteria for VAT refund. This includes ensuring that your input VAT exceeds your output VAT and that you are compliant with FTA filing requirements.
2. File VAT Returns: Your business must have submitted all VAT returns up to date. This includes monthly or quarterly VAT filings and payment of any due VAT.
3. Complete VAT Refund Application: Businesses must complete the VAT Refund Application Form available through the FTA’s online portal. You will need to provide:
   • Tax registration number (TRN)
   • Bank account details for the refund
   • Supporting documentation such as invoices, contracts, and proof of export (if applicable)
4. Submit the Application to the FTA: Once you have completed the necessary forms, submit your application via the FTA’s e-Services portal. The FTA will review your application and supporting documents.
5. FTA Review and Refund Processing: The FTA will assess your application and may request additional information. Once approved, the refund will be processed and credited to your nominated bank account.
6. Refund Timeframe: The processing time for VAT refunds can vary. Typically, businesses can expect the refund to be processed within 20 to 40 working days after the application is submitted, depending on the complexity of the claim.

b. For Tourists

Tourists can apply for VAT refunds at the Tax Refund for Tourists counters located at designated points of departure from the UAE. The process includes:

1. Make Purchases: Ensure that you shop at stores that participate in the VAT refund scheme. These stores will provide you with a special invoice.
2. Get Your Refund Form: After making purchases, request a Tax Refund Form from the retailer. The store will issue a VAT refund form for you, which is required for processing your claim.
3. Exit the UAE: When leaving the UAE, proceed to the VAT refund counter at the airport, seaport, or border. Present your passport, the Tax Refund Form, and your purchased goods for inspection.
4. Receive Your Refund: After verifying your purchases, the VAT refund will be processed and credited to your credit card or provided in cash, depending on the refund option selected.

5. Common Issues Faced During VAT Refund Applications

Businesses often face the following challenges during VAT refund applications:

• Incomplete Documentation: Ensure that all supporting documents are accurate and complete. Missing or incorrect invoices can delay your refund application.
• Non-Compliance with VAT Laws: Failing to comply with UAE VAT laws, such as timely VAT filings, can impact your ability to claim a refund.
• Incorrect Refund Calculations: Make sure that the VAT refund claim is calculated accurately to avoid discrepancies during the FTA’s review process.

6. How Tulpar Global Taxation Can Help

The VAT refund process can be complex, especially for businesses that are not familiar with UAE tax regulations. Tulpar Global Taxation offers professional VAT refund services to ensure that businesses claim their refunds accurately and on time.

Here’s how we can assist:

• VAT Refund Assessment: We evaluate your business’s eligibility for VAT refunds and ensure that the claim is valid.
• Document Preparation: Our team helps gather and prepare the necessary documents, such as invoices, contracts, and export proof, ensuring compliance with FTA guidelines.
• Filing and Submission: We handle the entire refund filing process through the FTA portal, ensuring that your application is submitted without errors.
• Ongoing Support: We provide continuous support and follow-up with the FTA to ensure your refund is processed efficiently.
• Consultancy: We offer guidance on how to manage VAT claims in the future, helping you optimize your VAT position and maintain compliance.

7. Conclusion

VAT refunds are an essential tool for businesses that need to recover excess VAT paid on purchases. Whether you’re a startup, an SME, or a large enterprise, understanding the VAT refund process is crucial to maintaining cash flow and ensuring compliance with UAE tax laws.

Tulpar Global Taxation provides expert assistance with VAT refunds, from application submission to refund processing. Contact us today to ensure that your business is maximizing its VAT refund opportunities and remaining compliant with all tax regulations.