Here’s how the UAE’s VAT refund system for tourists will work

The UAE’s Federal Tax Authority (FTA) has revealed that a system to refund value added tax (VAT) to tourists is currently in its final preparation stage.

The country’s cabinet approved a decision last week to implement the system from the fourth quarter of 2018, in a bid to attract more tourists.

The decision has set “clear standards” to ensure “transparency and accuracy” in the refund system, the FTA said in a statement.

Read more: UAE Cabinet approves VAT refund for tourists

The system will be run by an international operator.

It relies on an integrated digital system to set up a direct connection with points of sale, as well as with all UAE ports of entry.

This will allow the global operator to coordinate among retailers registered with the FTA, and enable tourists to submit refund requests for their purchases.

FTA director general Khalid Ali Al Bustani said: “The system operator will be signing agreements with retailers to provide them with the necessary technology to connect with the FTA, as well as with airports, and land and sea ports of entry.

“Designated spaces will be provided where tourists can easily reclaim taxes. The digital system determines the taxes that are eligible for a refund and then reimburse tourists.”

The FTA said that retailers who meet the requirements are free to register in the system.

If a tourist chooses to make a purchase with the intention of applying for a VAT refund from a registered supplier, then the supplier must provide them with the necessary documents including a tax invoice that meets all legal requirements.

The tourist can then submit the claim with the system operator and obtain the refund in cash or via credit card.

The FTA conducted extensive studies to formulate an optimal tax refund system before contracting the international system operator, Al Bustani added.

The Authority has outlined some basic conditions for the tourist to qualify for a tax refund through the system –

* The goods in question need to have been supplied to the tourist within the UAE’s borders

* The tourist must have the explicit intention to leave the country within 90 days from the date of supply, along with the purchased supplies

* The goods must be exported out of the UAE by the tourist within three months from the date of supply

* The tourist must purchase the goods from a retailer that is registered in the system

* The purchase process must be carried out – and the goods exported – according to the requirements determined by a decision of the FTA chairman

* The goods in question must not be excepted from refund

VAT, charged at a rate of 5 per cent,  came into force in the UAE on January 1 and applies to most goods and services.

Read: Revealed: Goods and services subject to VAT in the UAE