VAT refund for foreign businesses in the UAE has been saved
VAT refund for foreign businesses in the UAE
As of 1 March 2022, the reclaim window will be open for qualifying non-United Arab Emirates (UAE) established businesses to submit their Value Added Tax (VAT) refund requests to the Federal Tax Authority (FTA) for the 2021 calendar year.
During the period of 1 March 2022 until 31 August 2022, the FTA will accept refund applications for the UAE VAT refund for the Foreign Business scheme. Non-UAE resident businesses should now consider whether they have incurred VAT in the UAE and qualify for a refund. The documentation and evidentiary requirements for such a claim are stringent; therefore early action is recommended.
We are also aware that the FTA is currently revisiting prior years’ refund claims.
In some instances, the FTA is requesting further information on previously
stalled claims, which may present an opportunity to obtain approval. With
that being said, businesses that have made unapproved claims in prior periods
should check whether they have received any recent email correspondence from the FTA (any request should have been sent to the authorized contact at the time of the original claim). Nevertheless, the FTA is providing deadlines
for response to further information.
For more information, please get in touch on the following email ID: email@example.com, speak to your usual Deloitte contact or any of the team listed at the bottom of this message.
Who can claim for a refund?
Qualifying non-UAE resident businesses can apply for a refund of VAT paid on certain expenses incurred in the UAE during the 2021 calendar year when totaling in an excess of AED 2,000 under the UAE Foreign Businesses Refund Scheme.
To be eligible to make a claim, a non-UAE resident business should:
- Not have a VAT registration in the UAE;
- Not carry on business in the UAE;
- Carry on a business; and
- Be registered as an establishment with a competent authority in the jurisdiction in which they are established.
A refund is not available where:
- The business makes supplies in the UAE (unless the recipient is obligated to account for the VAT due);
- The input tax incurred is of a type which is irrecoverable by VAT registrants in the UAE (e.g. entertainment expenditure);
- The business is not from one of the eligible countries listed by the FTA; or
- The business is a non-resident tour operator.
The guidance published by the FTA in April 2021 states that the claims made by businesses established in the following countries will be eligible for consideration:
- Isle of Man
- Lebanon - in certain circumstances.
- Namibia - please note that refunds are only available for business goods that are exported and not for services consumed in the UAE.
- New Zealand
- Saudi Arabia
- South Africa – please note that refunds are only available for expenses relating to goods that are exported from a designated UAE port within 90 days and does not apply to services.
- United Kingdom (UK)
In the event that your business is not established in a country listed above, but has incurred UAE VAT which it has been unable to recover, there may be alternative measures which can be explored to minimize the irrecoverable VAT cost incurred in the future. Our VAT team will be pleased to assist you in this regard.
An important requirement of any claim submitted is that the original hard copy documentation, including attestation of such documentation in some instances, must be submitted along with the application.
This includes documentations such as:
- Original tax compliance certificate;
- Original tax invoices;
- Duly stamped proof of payment for all tax invoices claimed;
- Proof of authority of authorized signatory; or
- Passport copy of authorized signatory.
Based on our experience, the process of gathering the relevant documentation and attestations can be time consuming. The deadline for submission is fixed, and delaying preparation may result in an inability to recover in full, or a rejection of the refund application. We recommend that non-UAE businesses seeking to make a refund claim commence the process now.
We are also aware that in some instances the FTA has queried the use of AED bank accounts for the payment of refunds, and have specifically requested that foreign currency accounts are used for this purpose.
Deloitte can help
Deloitte has a team of VAT specialists in the UAE who can assist you through the process of applying for a refund. We can also review your supply chain structure with a view to minimize the cost of irrecoverable UAE VAT being incurred in future. This may be beneficial for business established in countries that are currently not recognized as eligible, but also to support effective cash flow management for businesses who are eligible to submit claims.