Tourists in UAE won't get retrospective VAT refund
Visitors will be able to claim refund via credit card or in cash through a global operator.
Tourists in the UAE are unlikely to get VAT refunds for purchases made before the refund scheme comes into effect from November 2018, according to UAE-based tax experts.
They say that as per Article (68) of Cabinet Decision (52) on Executive Regulations, the Cabinet may issue a decision on introducing tax refunds for tourists, specifying the date from which the scheme comes into effect.
"This means that the tourist refund will come in to effect after the scheme is implemented. So, any goods bought by the tourist will not be eligible for refund if it was bought before the introduction of the scheme," says Anurag Chaturvedi, managing partner of Chartered House Tax Consultancy.
The Federal Tax Authority (FTA) has clarified that after submission of required documents, a tourist shall be able to claim the refund via credit card or in cash through a global operator, he said.
An invitation sent to retailers and tax consultancies across the UAE by the FTA and the Dubai Chamber of Commerce and Industry disclosed that from November 2018, eligible tourists will be able to receive a proportion of the VAT as a refund when they shop at registered stores. Mayank Sawhney, director of MaxGrowth Consulting, says it is unlikely that the refund scheme for tourists will come into effect from a retrospective date due to the practical issues in implementing it.
"It is most likely going to be effective from the date that the FTA decides for implementation in the fourth quarter of 2018. Therefore, tourists will most likely not be able to get refund of VAT paid on their old purchases," Sawhney added.
Thais Cunha, associate at Aurifer Middle East, said a Cabinet decision is still awaited on whether the VAT incurred on purchases made before the scheme comes into effect will be refunded and what would be the limitations on claiming the refund.
Taking Europe as an example, Cunha said a tourist can get the VAT paid on certain items refunded once the purchase in a specific shop exceeds a minimum threshold of 175 euros (Dh750). But some countries have a lower threshold.
Chaturvedi said VAT regulations state that there will be limitations on claiming tax refunds.
For example, the FTA may set an eligibility of expense for tax refund in the form of a monetary ceiling. In various tax jurisdictions, supply of value below certain thresholds does not allow VAT refund to tourists.
The FTA may publish a list of goods that shall not be subject to tax refunds for tourists, Chaturvedi added.
Sawhney said the VAT refund for tourists will be applicable only on the goods which are physically taken out of the UAE. Therefore, tourists will not be able to able to get refund of the VAT they pay on the goods and services that they consume within the UAE.
"For example, tourists may not get refund of VAT paid on food and beverages they consume in UAE hotels and restaurants, VAT they pay on hotel room charges, VAT on tickets for water parks, theme parks, etc., as these goods and services are consumed by them within the UAE," added Sawhney.
Cunha said VAT incurred on food and beverages consumed by the tourist while in the country is usually not refundable, since there is no refund on services.
"One of the conditions to receive the refund of the VAT paid on goods bought in the country is that the tourist takes the relevant good to a place outside the UAE. Therefore, if goods were bought and consumed within the UAE, there will be no refund of the VAT," she added.
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