VAT Refund System for Tourists in UAE is at its Final Stage

According to the FTA (Federal Tax Authority) of UAE, a new system for returning VAT (value-added tax) to visitors and tourists is at its final stage. This new system depends on the advanced and latest integrated digital system, in order to set up a connection directly with sale points, along with all the port of entry in UAE – letting the global operator interrelate among retailers that are registered with the FTA, allowing tourists in UAE to submit refund requests. VAT advisors – 5% VAT was implemented by UAE on all goods in January, although the UAE Cabinet approved VAT refunds for visitors and tourists, the global operator hasn’t been named yet.

Also Read: FTA Clarification on Entertainment Tax

Conditions for Tax Refund

FTA outlined the basic conditions for tourists who are eligible for the tax refund, considering the Cabinet decision. Following are the conditions:

• The goods in question must be supplied to the tourists within the UAE borders.
• The tourist must have to leave the country within the given 90 days from the supply date – with the purchased supplies.
• The tourist must export the goods in question out of the UAE within the three months from the supply date.

The Cabinet decision also specifies that the tourists need to have goods purchased from the registered retailers, in order to get the tax refund approved. Also, the purchase process must be done according to the decision of FTA’s Chairman and the goods in question won’t be excluded from refund.

VAT correspondence – As it’s already mentioned above that VAT refund system for tourists in UAE is at its final stage, the FTA also declared that the retailers who meet the criteria will be free to register in the system and if any tourist wants to make a purchase with the intent to refund tax from a registered supplier, then the supplier must give them all the basic necessary documents that meet all the legal requirements. The tourist can then submit the claim directly with the system operator and can get the refund from the operator where the tourist had provided the adequate documents.

Read More: Federal Tax Authority of UAE Announces List of Designated Free Zones

Federal Tax Authority of UAE Announces List of Designated Free Zones

The FTA (Federal Tax Authority) of United Arab Emirates has declared three new UAE free zones – exempt from the VAT (value-added tax), which adds them to the VAT free designated zones list. After the latest edition, the designated zones in the UAE stand at 23. Considering the taxation services, VAT in UAE was implemented at the beginning of 2018; however, these areas are out of the UAE VAT scope. An area that fulfills the specific eligibility conditions according to the 2017’s Federal Decree Law #8 is considered as a designated zone and will be certainly regarded as out the VAT scope.

There are some newly added free zones to the list that are given below:

• International Humanitarian City – Jebel Ali, Dubai 
• Al Bateen Executive Airport Free Zone, Abu Dhabi
• Al Ain International Airport Free Zone 

Also, it’s been mentioned that there will not be any VAT applied to the transactions that take place within the designated zones.

VAT Implementation in UAE Designated Zones

As it’s already mentioned above that there are 23 designated zones in UAE – out of these 23, two are located in Sharjah, eight are located in Dubai, two are located in Umm Al Quwain (UAQ) and Fujairah, one in Ajman, three are in RAK (Ras Al Khaimah), and five are located in Abu Dhabi. 

Federal Tax Authority of UAE announces the list of designated zones – though, at this time, there are 10 free zones under-construction in UAE and more than 45 free zones across the UAE, which makes it highest in the world. There are almost 30 free zones in Dubai right now and the largest one is International Humanitarian City in Dubai.

Central Bank reported, UAE made 19.5% exports last year, as Dh225.5 billion worth exports were recorded by the UAE free zones in 2017. Plus, the exemption from VAT treatment is still expected to upsurge the export more in coming time. Companies that are located within the free zone can still avail VAT benefits for goods – products that are supplied not to be used inside the country since these transactions are out the VAT scope.

If new free zones that are under-construction meet the criteria, as suggested by the UAE VAT law, they might be added to the designated zones list. The UAE cabinet also highlighted that designated zones can be modified, added, and removed from the list. 

Read More: VAT Registered Businesses Must Display VAT Inclusive Prices

No VAT Implementation in Kuwait Before 2021 – Here’s Why!

According to the budget committee of the parliament, finance ministry seems to be in need of expediting actions in order to excise tax on goods. The next session of parliament will start from October 2018, in which excise tax will be approved. Kuwait, which is no doubt one of the emerging countries won’t be implementing VAT (value-added tax) before 2021, however, it will introduce the excise tax, as it was already made clear in a recent statement which was posted on the website of assembly. Also, VAT in UAE was implemented at the beginning of this year.

Without elaborating, the statement said that according to the committee, the implementation of the VAT is going to be postponed ‘til 2021. The statement also said that for the finance ministry, there seemed to be a need of expediting some measure in order to excise tax on few products like; carbonated drinks, tobacco etc.

VAT Implementation — Gulf Arab Countries

Originally, six wealthy and affluent Gulf Arab countries that are well-known as they export oil have agreed on introducing VAT at a 5% rate including the top ones; United Arab Emirates (UAE) and Saudi Arabia. As it’s already mentioned above, VAT in UAE has been already implemented and the requirements for VAT registration in UAE have been also made public.  However, the remaining four countries delayed as there is domestic political opposition and many technical challenges are also involved in the new taxation. Plus, these four countries didn’t announce any official date when they will impose VAT.

As it’s already known to many that the most powerful and influential parliament in the region is in Kuwait, the desire of budget committee to delay VAT seems to be right, even though the officials of the cabinet have asked for a speedy taxation system as well as expenditure reforms.

Revenues from New Tax

If we talk about the revenues from the new tax, it could be extensive.  According to IMF’s (International Monetary Fund) estimation, VAT in the United Arab Emirates will profligate almost 1.5% of the gross domestic product. However, as it is already mentioned above that the state finances of Kuwait are amid the strongest and powerful ones in the region — within the last several months the price of oil has increased which clearly shows that the government of Kuwait has very little immediate need of other revenues.  Also, Gulf governments seemed to be agreed on introducing an excise tax on products like carbonated/sugary drinks and tobacco – raising much less money as compared to the VAT. On Monday, the finance minister of Kuwait said that according to his anticipation, the excise tax will be approved by the parliament in October, during its next session.

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