How to Claim VAT Refund in UAE?

The Federal Tax Authority (FTA) introduced Value Added Tax (VAT) in United Arab Emirates (UAE) w.e.f 1st January 2018. Since then, various VAT refund schemes have been established, allowing eligible UAE nationals, foreign businesses, and tourists to claim VAT refunds. 

This guide provides an overview of each VAT refund scheme in the UAE, eligibility requirements, and a step-by-step process to claim VAT refunds.

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 example, if the tax paid on purchases (input tax) is higher than the tax collected on sales (output tax), the excess amount can be reclaimed through a VAT refund.

VAT refunds differ from VAT liability adjustments: in a VAT refund, the excess tax is returned directly, whereas in adjusting VAT liability, the input tax is deducted from the output tax, and only the remaining balance is paid to the authority.

VAT refunds offer several advantages, such as lowering costs for foreign businesses, reducing homeownership expenses for UAE nationals, and providing a financial incentive for tourists. In the UAE, there are three main categories eligible for VAT refunds:

1. Foreign Businesses: Refunds can be claimed annually by submitting a specific refund request form.
2. UAE Nationals Building New Residences: Refunds are available through a special form, downloadable from the FTA website.
3. Tourists: Refunds can be claimed at designated airports or self-service kiosks upon departure.

Process to Claim VAT Refund In UAE

The UAE government offers different processes for claiming VAT refunds based on the eligibility and needs of specific groups, including foreign businesses, UAE nationals building new residences, and tourists. 

Each process operates under different schemes with distinct eligibility criteria and requirements for filing.

VAT Refund for Foreign Businesses

Foreign businesses can reclaim VAT under the ‘VAT Refund Scheme for Foreign Businesses,’ intended to prevent double taxation and ease international trade. This scheme allows annual claims if eligibility criteria are met.

VAT Eligibility Criteria for Foreign Businesses

• Must have no fixed establishment in the UAE.
• Cannot be a taxable entity or conduct regular business in the UAE.
• Must be registered with an appropriate authority in their home country.
• Minimum refund claim: AED 2000.
• Claims allowed once per 12-month period.

Step to claim VAT refund for Foreign Businesses

You shall follow the below steps to claim a VAT refund:

1. Login to the FTA e-Services Portal: Access the portal using your registered username and password.
2. Access the VAT Refund Form: Go to the ‘VAT’ section, select ‘VAT Refunds,’ and choose ‘VAT Refund Request’ to open the form.
3. Complete the Refund Form: Enter the required information accurately. Fields marked with an asterisk (*) are mandatory, and some fields may be auto-populated based on your profile data.
4. Submit the Form: Review and submit the form. Ensure that bank account details are correctly registered to avoid delays.
5. Receive Confirmation and Processing Status: The FTA will typically process the VAT refund request within 20 business days. Once approved, the refund amount will be credited within 5 business days.

VAT Refund for UAE Nationals Building New Residences

UAE nationals constructing new residential buildings can claim VAT refunds on eligible expenses under the New Residence Construction Scheme. This scheme allows UAE nationals to reclaim VAT paid on specific construction-related expenses, ensuring financial support for new residential projects. The refund can be claimed once per project and is limited to VAT incurred on essential materials and services required for building a new residence.

Eligibility Criteria

• The applicant must be a UAE national building a new residential property.
• Eligible expenses include essential contractor services (e.g., engineering, construction) and certain building materials.
• Submission Deadline: The refund claim must be submitted within 12 months of project completion which is earlier of

• The date the building is occupied, or
• The date on which the UAE competent authority issues a completion certificate.

Eligible Goods

• Central air conditioning and split units
• Doors
• Window frames and glazing
• Flooring (except carpets)
• Fire alarms and smoke detectors
• Kitchen sinks
• Work surfaces
• Fitted cupboards
• Wirings
• Sanitary units
• Shower units

Steps to Get VAT Refund for Construction of New Building

1. Prepare Required Documentation: Gather all invoices and supporting documents for eligible expenses, such as building materials and contractor services (e.g., engineering, plumbing).
2. Obtain the Refund Form: Download the VAT refund form for UAE nationals from the FTA’s official website.
3. Complete the Form: Fill out all necessary fields in the form, clearly detailing eligible expenses. Attach all supporting documents. An FTA account is not required for this type of claim.
4. Wait for FTA Review: The FTA will review your application and notify you of approval or rejection. If approved, the refund amount will be credited to your account within 5 business days after approval.

VAT refund for UAE tourists

Tourists visiting the UAE can claim VAT refunds on eligible purchases made during their stay under the ‘Tax Refund for Tourists’ scheme, implemented to incentivize spending by allowing visitors to reclaim VAT on items bought for personal use.

Refunds cover up to 85% of the VAT paid, minus a small processing fee, making it easier for tourists to shop tax-free. This refund can be claimed at the airport before departing the UAE, with validation required within 90 days of purchase.

Eligibility Criteria

• Tourists must make purchases from UAE VAT-registered retailers who participate in the tax refund scheme.
• VAT refunds are available for purchases exceeding AED 250 and must be validated before departing the UAE.

How to Claim Refund for Tourists in UAE?

• Shop with VAT-Registered Retailers: Ensure the retailer is registered under the 'Tax Refund for Tourists’ scheme and let them know you intend to claim a VAT refund.
• Receive Tax-Free Documentation: The store will provide a digital tax-free form and a ‘tax-free’ tag on your receipt. Provide your passport for verification.
• Validate Purchases Before Departure: At the airport, use the ‘Tax Free’ validation counters or self-service kiosks to validate your receipts before security. You’ll need:
• Select Refund Method: Choose either cash, credit card, or digital wallet for the refund method. 
• Complete Validation and Depart: Leave the UAE within 6 hours of completing validation. The refund (if via card or wallet) will be processed within approximately 9 days.

VAT Refund Schemes in the UAE

VAT refunds in the UAE are available through various schemes, each with specific eligibility categories, conditions, and purposes.

Conclusion

The VAT refund system in the UAE significantly reduces costs for eligible applicants, whether they are foreign businesses, UAE nationals building new residences, or tourists. By allowing refunds on VAT paid for specific expenses, the UAE incentivizes investment, construction, and tourism, boosting economic activity.

Major eligibility criteria vary across applicant types but generally require verification of the applicant’s status, use of services or goods for designated purposes, and adherence to specified timelines.