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
FTA issues guidelines for foreign businesses’ VAT refund in UAE
The foreign business must not have a place of establishment or fixed establishment in the UAE
The Federal Tax Authority (FTA) has outlined four conditions that would allow foreign businesses to recover value-addded tax (VAT) incurred in the UAE.
To be eligible for the VAT refund, the first condition is that foreign businesses must not have a place of establishment or fixed establishment in the UAE or in any of the VAT-implementing GCC states.
Secondly, such foreign businesses must not be a taxable person in the UAE. Thirdly, they must also be registered as an establishment with a competent authority in the jurisdiction in which they are established; and finally, they must be from a country that implements VAT and that equally provides VAT refunds to UAE businesses in similar circumstances.
The authority clarified that the period of each refund claim shall be a calendar year, noting that for claims in respect of the 2018 calendar year, refund applications can be made as of April 1, 2019. However, for subsequent calendar years, the opening date for accepting refund applications will be March 1 of the following year; this means that for the period from January 1 to December 31, 2019, applications will be accepted as of March 1, 2020.
The FTA went on to stress that the minimum claim amount of each VAT refund application submitted by business visitors is Dh2,000, which may consist of a single purchase or multiple purchases. The Authority urged potential applicants to hold on to the original tax invoices on the purchases for which they would like to reclaim VAT, as they will be required to be submitted along with the refund applications.
The state may still submit a VAT refund application to reclaim VAT incurred in the UAE under this scheme, the FTA assured, outlining only three situations where VAT cannot be reclaimed.
The first situation is if the foreign business in question makes supplies in the UAE, unless the recipient is obliged to account for VAT under the reverse charge mechanism. Secondly, a VAT refund cannot be processed if the input tax in respect of any goods or services is “blocked” from recovery and, therefore, not recoverable by a taxable person in the UAE. The third situation where a refund is not possible is if the foreign business is a non-resident tour operator.
Khalid Ali Al Bustani, director-general, FTA, noted that this procedure reflects positively on many sectors, including tourism, trade, exhibitions, conferences, etc.
He further explained that reciprocity is a key condition for the procedure, whereby the Authority will refund the VAT to businesses resident in countries that refund VAT for UAE businesses visiting their territories.
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.