Recently, the Federal Tax Office (FTA) in the UAE has announced a newly approved VAT refund scheme for tourists who visit the country. According to provided information, this system will resemble the similar processes, which apply in some countries of Europe and Asia. Its launch will happen shortly, and in accordance with this approved scheme, sales points and outlets will be connected to the announced tax refund system.
As we have mentioned, similar systems are already working in several countries, for example, in some of the European countries you can get a VAT refund, but only at the airport when leaving the country. Another example is Japan. Here you will receive a VAT refund at the outlet where you have purchased the product by sending the appropriate documents. Something similar is expected to work in the UAE.
According to experts, special points will be organized here at the airports where tourists can receive a refund, as well as a number of return points, something like cash terminals at retail outlets. At these points, after presenting all the necessary documents confirming the fact of purchase and the tourist’s documents, a person can immediately get his/her VAT money back. Such a mixed structure is designed to prevent excessive queues of tourists at airport at the VAT refund points.
Among the documents required for refund, a tourist must provide his/her passport, and show this passport to a seller at the time of the purchase, in order this tourist not to be subject to Value Added Tax. As expected, the system will be fully operable in several months, but to do this, it is necessary to register retail outlets in the VAT refund system. According to available information, a tourist will even be able to receive VAT refund immediately after the purchase of the goods, at the point of sale. Registered retailers following a specified procedure will pay compensation immediately. According to this scheme, they will have to provide the FTA with proof of purchase of the goods by a foreigner – a copy of his/her passport, or a visit visa.
That is, we can expect that the VAT refund system for foreigners will be available in the UAE in the second half of 2018. The stringency of the adopted rules and regulations defines how easy and effective this system will work - different options will be available for the tourist – return points in ports, airports, at customs posts, in outlets and special terminals, the easier and faster it will be to pass a refund.
As for the procedure of VAT refund for tourists, it will be implemented when the following conditions are fulfilled:
- A tourist buys some goods on the territory of the UAE during his/her staying here.
- The product was purchased within 90 days of his/her staying in the UAE (that is, this person is a tourist, but not a foreign worker of a local company).
Also, as expected, the tax authorities will provide a list of particular goods for which no VAT refunds will be made.