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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.
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.
A foreign business is any business that is registered with a competent authority in the jurisdiction where it is established.
Foreign businesses are eligible to apply for refund of VAT under the business VAT refund scheme in the following cases:
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.
The foreign business should be registered as an establishment with the relevant authority in its jurisdiction.
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)
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' .
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.
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.