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All you need to know about Claimable VAT

The UAE is recognized as the “Gateway to the Middle East and Northern Africa.” Because of the UAE and Emirati governments’ friendly business policies, the UAE has become a stifling business and investment destination. The UAE government has implemented new VAT taxation, which will provide an extra source of revenue for infrastructure development to maintain the country’s growth and reputation as an investment-friendly destination. The UAE VAT legislation has several provisions, one of which is the claimable VAT clause.

VAT in the UAE

Value Added Tax (VAT) is a sort of consumption tax on goods that is applied at each level of value addition in the supply chain, from manufacture to distribution and finally to the point of ultimate sale. Only the value addition, i.e. the cost of the product minus the costs of materials used, which are already taxed at the point of purchase, is used to compute the overall tax amount. In contrast to a sales tax, which is charged to the consumer at the very end of the supply chain network, VAT is estimated and collected at each stage.

In 2017, the UAE, along with the other GCC states, implemented VAT. In the UAE, the VAT went into force on January 1, 2018. For the majority of goods and services offered in the country, the VAT rate is currently set at 5%. Certain commodities have a 0% VAT rate while others have complete VAT exclusions.

Claimable VAT

Suppliers of goods and services can reclaim input VAT on products and services sold or qualifying activities under UAE VAT law rules. The tax paid by the supplier on the raw materials and related services used to create the product is referred to as input VAT.

Suppliers are entitled to a refund of the tax paid on goods and services utilized solely for taxable supplies. At the time of the claim, the company must have valid VAT invoices or necessary Customs receipts as supporting documents. To support tax claims, all transaction records are required.

To recoup input VAT, a taxpayer must file a claim. Taxes paid on VAT-exempt supplies or non-business activities cannot be reclaimed by the taxpayer. The supplier can only reclaim the VAT amount used for taxable supplies where the input costs are related to taxable supplies and other non-claimable activities. Only after filing VAT returns can the taxpayer seek a VAT refund.

Within 20 business days of receiving the request to reclaim VAT, the Federal Tax Authority (FTA) will assess and process the claim application. The taxpayer is notified in writing of the FTA’s acceptance or rejection of the VAT claim. In rare circumstances, if the due process takes longer than the customary 20 days from the date of submission, the FTA will notify the taxpayer of the delay.

How to Claim VAT refund in the UAE?

Please follow the steps below to apply for a VAT refund.

  • The taxpayer should go to the e-Services Portal of the UAE FTA.
  • Access the ‘Form VAT311’ under the VAT tab, in the VAT Refunds tab, by selecting VAT refund request.
  • Taxpayer TRN; Entity registered name in English; the total amount of excess refundable tax in AED; the amount the taxpayer seeks to be refunded in AED; remaining extra amount of refundable tax; any late registration penalty is AED is among the fields on the form. A few fields in the Form are pre-filled with information from an existing account. After you’ve double-checked everything, click the submit button to send the form.
  • The taxpayer will receive a confirmation email from the FTA once the application has been submitted successfully, informing them of the refund application’s outcome. The refund amount is processed to the taxpayer’s bank account within five business days after the authority approves the requisite claim.
  • The taxpayer can check the refund status by going to the My Payment page in the Transaction History part of the e-Services portal and looking at the balance.

In some rare circumstances, the taxpayer may be able to process the VAT refund. Business tourists and UAE nationals working in the construction of new residential buildings in the country, for example, are subject to unique VAT refund processes.

How Can We Help?

Alya Auditors is a pioneering accounting firm in the United Arab Emirates. We’ve taken care of UAE and worldwide clients’ business needs. Our VAT consultants assist clients with all elements of VAT in the UAE, including registration, invoice preparation, VAT payments, returns filing, and refund claim submission. Please contact us if you have any questions about VAT. We’d be pleased to assist you!