VAT in UAE: Now get refunds at shopping malls, hotels
Kiosks allow tourists to process their requests to recover VAT.
The Value Added Tax (VAT) Recovery Self-Service Kiosks for Tourists scheme has been expanded to be available at major shopping malls and hotels, in addition to the existing ones at air, land and maritime entry and exit ports across the UAE, announced the Federal Tax Authority (FTA).
The expansion aims to provide additional services to tourists, enhancing the UAE’s status as a leading destination on the international tourism map. Planet – the company authorised by the FTA to operate the electronic system for the Tax Refunds for Tourists Scheme – debuted nine self-service kiosks in stage one of implementing the plan, setting them up at multiple shopping malls and hotels. The kiosks are equipped with state-of-the-art technology allowing them to fully process VAT refund requests for tourists.
In a statement issued on Monday, the authority explained that the kiosks allow tourists to process their requests to recover VAT from the convenience of their hotel or at major malls in a matter of minutes.
Applicants can scan their boarding pass to prove they will be leaving the UAE in the next 24 hours, as well as their original passport (or identity card for GCC nationals), and then follow the simple instructions displayed at the self-service kiosks. The FTA revealed that up to 55 new self-service kiosks will be deployed by the end of 2020 – 25 of which would be stationed in malls and 30 in hotels.
Khalid Ali Al Bustani, director-general of the FTA, said: “Our objective from expanding the self-service kiosk is to provide further facilities and additional options for tourists looking to recover taxes. Eligible tourists who meet the necessary criteria for reclaiming the VAT they incurred on their purchases in the UAE can process the refund applications from the convenience of their own hotels or from a list of major shopping malls around the country.”
The number of digital transactions under the Tourists Refunds Scheme grew to 3.2 million in the period between its launch in November 2018 and the end of 2019.
Tourists can submit their requests to recover the taxes they incurred on purchases in the UAE when they are about to depart from the country. Applicants must submit the tax invoices on their purchases, marked with ‘Tax-Free’ stickers issued by retail outlets registered in the system, along with their passport and credit card. No limit is placed on the maximum amount that can be recovered if said amount is transferred to the tourist’s credit card, however, in the event that the applicant requests a cash refund, then the maximum amount is set at Dh7,000 per day. This process can be carried out at self-service kiosks, as well as at tax refund offices located at ports of exit across the UAE.
Facebook announces 5% VAT on ad services in UAE
The notice was issued this week.
Facebook announced a tax on one of their services in UAE this week.
In a notice issued to users in UAE, the social media giant said that it was implementing value-added tax (VAT) on the sale of ads in UAE:
Due to an implementation of a value-added tax (VAT) in the United Arab Emirates, Facebook is now required to charge VAT on the sale of ads in UAE. All advertisers with a ‘sold to’ of United Arab Emirates that have not provided a tax registration number will be charged VAT at 5% on advertising services.
If you haven’t already, here is how to update your account:
Go to Account settings
Add or confirm your state
Add your 15-digit tax registration number
It is important that you provide a valid tax registration number. We are legally required to verify this number with the UAE tax authority. Invalid tax registration numbers will be disregarded and as a result, you will be charged a 5% VAT on the purchase of ads.
For additional information, please visit our help content.
The Facebook Business Team
UAE-Saudi double tax avoidance agreement to lift trade, investment
The Avoidance of Double Taxation Agreement between the UAE and Saudi Arabia, which is expected to facilitate the two-way investment flow, boost bilateral trade and further bolster economic ties, has come into effect at the beginning of April after nearly a year the landmark pact was signed.
The two countries signed the double income tax treaty, the first such agreement between two members of the GCC, in May 2018. The agreement seeks to strengthen cooperation frameworks in tax matters and consolidate financial, economic and investment relations as well as encourage free movement of capital and service exchange between the two nations, tax experts.
Tax experts said the treaty would benefit individuals and corporates in the two countries. An international tax framework provides important protections and benefits for UAE companies and expatriates. For expatriates, the agreement come into play when they have a second residency outside the UAE. For companies, agreements can result in exemptions and reduced withholding tax rates on dividends, interest and royalties. If a UAE company has international shareholders, it is not subject to the tax of the jurisdiction of the shareholders, according to experts.
Double taxation avoidance agreements allocate taxing rights and ensure individuals and businesses are only taxed once. They clarify how certain types of income, such as dividends, property income and pensions, should be taxed, and lay out rules on non-discrimination to prevent different treatment based on factors such as nationality or residency, according to analysts.
Younis Haji Al Khoori, under-secretary of the Ministry of Finance, said the agreement is an important step in enhancing bilateral relations between the two countries, especially in financial and economic spheres. “This agreement will contribute to a more flexible investment climate that will underscore the country’s position as a key destination for Saudi investments. This agreement represents a qualitative leap forward in terms of the framework of financial, economic and tax cooperation between GCC countries,” he added.
The Ministry of Finance aims to expand the network of bilateral double taxation avoidance agreements with various countries around the world to fulfil the vision of the wise leadership of the state in diversifying sources of income and advancing the development objectives of the state, said Al Khoori.
“These agreements contribute to the elimination of double taxation, facilitate cross-border trade and investment flows, and provide protection to taxpayers from direct and indirect double taxation. This in turn enhances the country’s investment climate and makes it more attractive as a destination for foreign investment,” said Al Khoori.
Investments of Saudi citizens and banks in the UAE were valued at Dh17.08 billion in 2017, whereas the number of business licences issued to Saudi citizens in the UAE reached 12,451 by end of 2017.
Official data shows that the volume of trade between Saudi Arabia and the UAE reached Dh32.93 billion in 2017, and the number of Saudi shareholders in the UAE joint stock companies reached 118,8708.
The value of real estate transactions for Saudi nationals in the UAE was Dh59 billion in 2017, while the total number of property owners in the UAE was estimated at 4,989 by end of 2017.
VAT not recoverable on staff parties in the UAE, clarifies regulator
Tax registered businesses in the UAE cannot recover value added tax (VAT) incurred on expenses associated with activities to entertain personnel, such as staff parties that are free to attend, the Federal Tax Authority (FTA) has clarified.
According to the federal law, VAT incurred on goods or services purchased to be given away to staff free of charge, in order to reward them for long service, should be blocked from recovery of the tax, the FTA said.
Examples of these gifts include: long service awards, retirement gifts, Eid gifts, or gifts for other festivals or special occasions, gifts given on the occasion of a wedding or birth of a child, employee of the month gifts, or a dinner to reward service.
In a recent press statement, the FTA clarified that entertainment services consist of “hospitality of any kind” including the provision of: accommodation; food and drinks which are not provided in a normal course of a meeting; and access to shows or events or trips provided for the purposes of pleasure or entertainment.
However, a ‘designated government entity’ is eligible to recover the input tax incurred on costs to provide entertainment services to anyone not employed by the entity.
The exception is applicable: during meetings with delegations from other countries where lunch or dinner is provided; during meetings with representatives from other government entities to discuss official business, where refreshments are provided; and during ceremonies held to mark significant political events, eg the signing of an international agreement, where entertainment is provided to the audience.
For VAT registrants who are not ‘designated government entities’, input tax cannot be recovered if it is incurred for entertainment services provided to non-employees including customers, potential customers, officials, or shareholders, or other owners or investors.
The FTA also clarified that if goods or services are purchased for use by employees for their personal benefit, including the provision of entertainment services, then the VAT incurred on the cost is not recoverable unless an exception applies.
This means that all companies, including ‘designated government entities’, which provide entertainment services to employees are prevented from recovering any VAT included on such costs.
The only circumstances in which a taxable person is entitled to recover VAT on such costs are: where it is a legal obligation to provide those services or goods to those employees; it is a contractual obligation or documented policy to provide those services or goods to those employees so that they may perform their role and it can be proven to be normal business practice; and where the provision of goods or services is a deemed supply under the provisions of the decree-law.
The authority also outlined certain circumstances where a taxable person will fund or reimburse an employee for certain costs incurred for business purposes.
These include cases where an employee is on a domestic business trip and requires overnight accommodation – in which case the VAT incurred on hotel costs would be recoverable; as well as input tax incurred on subsistence costs – food and drinks purchased by the employee for their own consumption during the trip.
But if the employee incurs costs which are related to entertaining a current or potential customer/supplier, then any associated input tax incurred will be non-recoverable.
The FTA issued the latest public clarification regarding ‘Non-Recoverable Input Tax – Entertainment Services’ on its website to raise awareness among tax payers about the technicalities of the system, a statement said.
FTA director general Khalid Ali Al Bustani said: “These clarifications are formulated after a thorough study of the tax laws, executive regulations, and the guides published on the Federal Tax Authority’s website.”
The UAE introduced the 5 per cent VAT on most goods and services from January 1 this year.