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UAE Freezones Biz News Updates
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FTA issues guidelines for foreign businesses' VAT refund in UAE
The foreign business must not have a place of establishment or fixed
establishment in the UAE
The Federal Tax Authority (FTA) has outlined four conditions that would
allow foreign businesses to recover value-addded tax (VAT) incurred in the
UAE.
To be eligible for the VAT refund, the first condition is that foreign
businesses must not have a place of establishment or fixed establishment in
the UAE or in any of the VAT-implementing GCC states.
Secondly, such foreign businesses must not be a taxable person in the UAE.
Thirdly, they must also be registered as an establishment with a competent
authority in the jurisdiction in which they are established; and finally,
they must be from a country that implements VAT and that equally provides
VAT refunds to UAE businesses in similar circumstances.
The authority clarified that the period of each refund claim shall be a
calendar year, noting that for claims in respect of the 2018 calendar year,
refund applications can be made as of April 1, 2019. However, for subsequent
calendar years, the opening date for accepting refund applications will be
March 1 of the following year; this means that for the period from January 1
to December 31, 2019, applications will be accepted as of March 1, 2020.
The FTA went on to stress that the minimum claim amount of each VAT refund
application submitted by business visitors is Dh2,000, which may consist of
a single purchase or multiple purchases. The Authority urged potential
applicants to hold on to the original tax invoices on the purchases for
which they would like to reclaim VAT, as they will be required to be
submitted along with the refund applications.
The state may still submit a VAT refund application to reclaim VAT incurred
in the UAE under this scheme, the FTA assured, outlining only three
situations where VAT cannot be reclaimed.
The first situation is if the foreign business in question makes supplies in
the UAE, unless the recipient is obliged to account for VAT under the
reverse charge mechanism. Secondly, a VAT refund cannot be processed if the
input tax in respect of any goods or services is "blocked" from recovery
and, therefore, not recoverable by a taxable person in the UAE. The third
situation where a refund is not possible is if the foreign business is a
non-resident tour operator.
Khalid Ali Al Bustani, director-general, FTA, noted that this procedure
reflects positively on many sectors, including tourism, trade, exhibitions,
conferences, etc.
He further explained that reciprocity is a key condition for the procedure,
whereby the Authority will refund the VAT to businesses resident in
countries that refund VAT for UAE businesses visiting their territories.
January 19, 2019 |
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Courtesy Galadari Printing and Publishing LLC.
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