Step-by-Step Guide to Claiming Your VAT Refund in the UAE

The Federal Tax Authority (FTA) has introduced Value Added Tax (VAT) in the UAE. VAT intends to help the eligible taxable persons to prepare their claim to the FTA. Since 1st January 2018 when VAT came into effect, various VAT refund schemes have been established that allow eligible UAE nationals, tourists, and foreign businesses to claim the VAT refunds in Dubai.

What is a VAT refund in UAE?

A VAT refund in UAE allows businesses and individuals to reclaim VAT paid on eligible expenses when their input tax exceeds output tax in a tax period. For instance, if the input tax is greater than the output tax i.e. tax collected on sales, the excess amount can be reclaimed through a VAT refund. Generally, VAT refunds are different from VAT liability adjustments. In a VAT refund, excess amount is returned directly whereas while adjusting VAT liability, input tax is deducted from output tax and remaining amount is paid to the authority.

There are several advantages tax refunds UAE brings to individuals and businesses.

• It lowers the cost for foreign businesses
• It reduces the residential expenses for UAE nationals
• It provides financial incentives to the tourist community.

Below are three main  categories that show eligibility for VAT refunds.

Foreign Businesses: They can claim annual refunds by submitting the specific refund request form.

UAE Residents: UAE nationals can submit a downloadable form from the FTA website.

Tourists: They can claim refunds at the designated airports and self-service kiosks stations.

Businesses in the UAE should claim the VAT refund Dubai to recover the input VAT paid on eligible supplies and services. This ultimately reduces their overall cost and improves the cash flow. It also helps promote a fair competition as companies are free from the cost of VAT on business expenses.

Process to Claim VAT Refund In UAE

Each process has different eligibility criteria and reclaim requirements.

VAT Refund for Foreign Businesses

Foreign businesses can reclaim VAT under the ‘VAT Refund Scheme for Foreign Businesses’ to avoid double taxation and ease international trade. Claims are allowed once per year if criteria are met.

The eligibility criteria says that the minimum claim should be AED 2000. There should be no fixed establishment in the UAE. Secondly, business should not be a taxable entity or conducting regular business in the UAE. and should be registered with the relevant authority in their home country.

Steps to Claim:

1. Log in to the FTA e-Services Portal.
2. Access and complete the VAT Refund Form under the ‘VAT Refunds’ section.
3. Submit the form, ensuring correct bank details.
4. The FTA processes claims within 20 business days, with refunds credited within 5 business days.

VAT Refund for UAE Nationals

When it comes to the UAE nationals, the ones who are constructing new residential buildings can claim VAT refunds. The application is eligible for certain expenses defined as per New Residence Construction Scheme. The scheme discussed the reclaim of VAT refunds for the UAE nationals for what is paid on specific construction-related expenses. It ensures financial support for new residential projects. It is noteworthy that the refund can be claimed just one per project and it is limited to the essential materials and services as mentioned in the scheme.

Eligible expenses include essential contractor services and certain building materials. Refund claims must be submitted within 12 months of project completion, either when the building is occupied or when the completion certificate is issued. Eligible goods include central air conditioning, doors, window frames, flooring (except carpets), fire alarms, kitchen sinks, work surfaces, fitted cupboards, wirings, sanitary units, and shower units.

How to Claim:

Follow the steps below:

1. Gather invoices and documents for eligible expenses (e.g., building materials, contractor services).
2. Download the VAT refund form for UAE nationals from the FTA website.
3. Complete the form with details of eligible expenses and attach supporting documents (no FTA account required).
4. The FTA will review your application and notify you of approval or rejection.
5. If approved, the refund will be credited to your account within 5 business days.

VAT Refund for Tourists

Tourists visiting the UAE can claim VAT refunds on eligible purchases under the ‘Tax Refund for Tourists’ scheme, covering up to 85% of VAT paid, minus a small processing fee. VAT refund at airport Dubai must be claimed within 90 days of purchase.

When it comes to the eligibility criteria, purchases must be made from VAT-registered retailers and the total must exceed AED 250, and validation is required before departure.

How to Claim:

• Shop at VAT-registered retailers and request tax-free documentation to benefit from VAT registration and streamline your tax processes.
• Validate purchases at the airport using ‘Tax Free’ counters or kiosks.
• Choose your refund method (cash, credit card, or digital wallet).
• Complete validation and depart within 6 hours; refunds are processed within 9 days if via card or wallet.

Conclusion

The VAT refund system in the UAE is beneficial for businesses, UAE nationals, and tourists based on their eligibility. The criteria for eligibility varies across the applicant types and require verification for the status of applicants, their use of goods and services for designated purposes while adhering to specified timeliness.

ZSConsultants offers you the customized VAT refund services that allow your business to claim the annual VAT refund without any complexities. We help you look ways for your business growth while minimizing the additional costs and cut the expense wherever possible. So get in touch with our expert chartered accountants to streamline your cash flow.