VAT REFUND SCHEME FOR TOURISTS
INTRODUCTION
The Federal Tax Authority in its fifth meeting held on 25th April, 2018 said that the number of businesses that have been registered for VAT had surged to 281,000 while 637 had registered for excise tax . On the same day, the authority had also approved a refund scheme for the tourists under which the outlets and points of sales across the UAE were proposed to be connected to the refund system. The tax experts said that the refund system would be implemented soon and it could be a mix of what is currently prevalent in Europe and Asia. As per the regulations, the tourists that would be visiting the UAE would be able to claim back VAT on the purchases which they make whilst on holiday in the country. For example, the shoppers who come to visit the country but are living outside EU would be able to ask for VAT refunds at the customs at the time of leaving the country.
DOCUMENTS FOR CLAIMING TAX REFUNDS
The tourists are required to carry original passport which is to be shown to the authorised retailers at the time of shopping and are not only required to carry a passport copy if they want an authorised dealer to not charge consumption tax to them while they claim the tax refunds.
FACILITY PROVIDED TO THE RETAILER
In order to empower the retailers to decide the VAT liability at the time of supply, all the retailers would be associated with the tourist refund system. For this, every retailer would be registered as a part of the tourist refund scheme or a designated refund processing centres in each shopping mall. Furthermore the retailers would be able to issue the refunds directly to the tourists when they are buying the goods subject to the guidelines that have been provided by the FTA. The guidelines would be issued for the retailers to get registered and they would be required to follow certain process for the issuing any such tax refunds. For this purpose, the retailers would have to retain a copy of the tourist’s passport or visit visa as a proof to submit to the FTA for tax refunds.
IMPLEMENTATION OF THE SCHEME
The refund scheme would be implemented by the third quarter depending upon how stringent the guidelines are and it might be implemented by the end of second quarter of 2018.
FROM WHERE WOULD THE TOURISTS BE ABLE TO CLAIM REFUND ?
Provided that there are a huge number of tourists who come to UAE every year, FTA may provide for authorised points to make sure that there are no long queues of tourists at the UAE airports who will be waiting to get refunds. Airports or some selected points outside the airport such as certain money exchanges would be considered as authorised points in order to get tax refunds after submitting the documents and the showing an evidence that all the conditions required for being entitled to claim refund as a tourist are fulfilled. The tourists could also claim their refunds from border posts, sea ports and all major ports custom terminals.
CONDITIONS TO BE APPLIED TO THE TAX REFUNDS FOR TOURISTS SCHEME
The conditions that are to be applied to the tax refunds for tourists scheme are :
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The goods must be supplied to the visitor whilst he or she is in the country at the time of purchase
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The visitor must be intending to leave within 90 days of purchase
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The visitor must be from outside the GCC
The cabinet may however publish a list of goods that would not be eligible for refunds.
CONCLUSION
VAT had caused an increase in the prices of many supplies in the UAE that had resulted in a drop in the demand since Dubai had become slightly more expensive than Hong Kong and Singapore. The tax refund system for the tourists would thus help the nation to get back its reputation as a popular tourist destination.
