The UAE, with its glitzy malls, gold souqs and luxury outlets, is a shoppers’ paradise that offers the best brands from around the world. Tourists clearly want to take advantage of the shopping opportunities while visiting the country.
The country’s decision to refund Value Added Tax (VAT) paid by tourists on their purchases is a sweetener for the travel, tourism and retail sectors.
The UAE introduced VAT on January 1, 2018. Keeping with the global practice of exempting tourist purchases from VAT, the Federal Tax Authority (FTA) implemented the VAT refund scheme for tourists starting November 18, 2018.
The UAE along with its GCC neighbour Saudi Arabia has one of the lowest VAT rates of 5 per cent among the countries that have implemented VAT or any equivalent consumption tax.
Across the world, VAT-implementing countries follow tax refund schemes for goods purchased by tourists from approved tax-exempted stores that are registered with the tax authorities.
Tourist purchase of goods are considered deemed exports that will be consumed outside the country and thus they qualify for VAT exceptions. However, most countries including the UAE do not offer VAT refund on services purchased and consumed within the UAE such as hotel stays, restaurant bills, healthcare services that may be subject to VAT.
As a thumb rule globally, VAT refunds are available only to tourists and non-residents of the country/jurisdiction. The UAE too applies the same rule and makes it clear that resident expatriates are not eligible to claim VAT refund on their purchases.
In the UAE, VAT refund is available only to goods purchased within the country through approved stores. In keeping with global practice, services purchased and consumed by tourists and visitors do not qualify for VAT refund. Thus visitors need to know that VAT charged on their hotel bills, hospital bills or restaurant bills are not eligible for VAT refund.
All GCC tourists, both nationals and residents, except those from countries that have a VAT regime can claim VAT refund on goods purchased during their visit to the UAE under the refund scheme.
The FTA has clearly defined the conditions for VAT refund for tourists.
As long as tourists buy items through registered stores across the country, they will be able to claim the VAT refund.
Shops who participate in the FTA’s tax refund scheme for tourists usually display a board indicating goods purchased there are eligible for VAT refund. But to be on the safer side, tourists should check if the shops are registered for VAT refund scheme.
We offer a professional, personalized and confidential service to communicate the financial information that will allow you to make well informed, sound business decisions with confidence. Our fully outsourced accounting service offering includes handling the primary books of account, payrolls, VAT returns, levies and all other areas of the accounting function and deliver monthly reports, annual financial statements, and taxation reports.Apart from that we also provide Annual Auditing Services and Business Setup services in the UAE.
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