Business VAT Refund Scheme

Tally Solutions | Updated on: March 2, 2022

What is the business VAT refund scheme in UAE?
What is a foreign business?
How can a foreign business be eligible to claim Tax Refund?
Who are not eligible to claim Tax Refund as per UAE VAT?

Under VAT in UAE, the FTA has designed a scheme for business visitors to UAE to claim refund of VAT paid on expenses incurred in UAE. This is similar to the business VAT refund scheme available in the European Union. Let us understand more about the business VAT refund scheme in UAE.

What is the business VAT refund scheme in UAE?

Under the business VAT refund scheme, foreign businesses are allowed to claim refund of VAT paid on expenses incurred in UAE, provided the required conditions are met.

What is a foreign business?

A foreign business is any business that is registered with a competent authority in the jurisdiction where it is established.

How can a foreign business be eligible to claim Tax Refund?

Foreign businesses are eligible to apply for refund of VAT under the business VAT refund scheme in the following cases:

a. The business is resident in a GCC State that has not implemented VAT

A business which is resident in a GCC State which has not implemented VAT is eligible for the business VAT refund scheme. Currently, only UAE and KSA have implemented VAT in the GCC. Hence, businesses which are resident in the other GCC States are eligible for this scheme.

b. Is a foreign business in a country outside of the GCC and fulfills the following conditions:

Should be registered as an establishment with a competent authority in the jurisdiction in which it is established

The foreign business should be registered as an establishment with the relevant authority in its jurisdiction.

Should not have a place of establishment or fixed establishment in UAE or another State which has implemented VAT

The foreign business should not have a place of establishment or fixed establishment in UAE or a State which has implemented VAT (i.e. currently, KSA)

Should not be a Taxable Person

A taxable person is any person who is registered under UAE VAT or who is obligated to register under UAE VAT. The business claiming refund of VAT under the business VAT refund scheme should not be a taxable person under UAE VAT. To understand who should register under UAE VAT, you can refer our article 'Who should register under VAT' .

Should be from a country which provides refund of VAT to UAE entities in the similar circumstances

It is essential that the foreign business should be from a country which provides refund of VAT to UAE entities in similar circumstances.

Note: The tax claimed should not relate to goods or services for which tax is not recoverable. Under UAE VAT, certain supplies are not eligible for input tax recovery. To learn more about these supplies, you can refer our article 'Supplies not eligible for input tax recovery'. The foreign business claiming tax refund under the business VAT refund scheme should ensure that it does not relate to goods or services for which tax cannot be recovered.

Who are not eligible to claim Tax Refund as per UAE VAT?

A foreign tour operator is not eligible to claim Tax Refund under the business VAT refund scheme.

Hence, the business VAT refund scheme is an attractive scheme for foreign businesses visiting UAE. While the framework of the VAT refund scheme has been laid down, this is not rolled out yet. As a result, the details of the exact process for claiming refund under this scheme are not available yet, and will be made available at a later date.

Read more on UAE VAT

UAE VAT Return, VAT in UAE, How Does VAT System Works, Frequently Used Terms in VAT, VAT Exempt Supplies in UAE, VAT Return Form 201, Tax Audit under VAT in UAE, Supply under UAE VAT, Supply of Goods and Services in UAE VAT, Input Tax Recovery under VAT in UAE, VAT Return Filing in UAE, VAT Return Filing Period in UAE, Tax Agent under UAE VAT