Tourists to receive VAT refunds from November 18

FTA said more than 4,000 retail outlets will participate

Tourists will be able to claim back Value Added Tax (VAT) on any purchases they make in the UAE from November 18, it was announced yesterday.

The Federal Tax Authority (FTA) said that the Tax Refund for Tourists Scheme would go into effect next month, allowing eligible tourists to request refunds of the five per cent VAT incurred on their purchases.

 The first phase will see the digital system of the Tax Refund for Tourists Scheme implemented at Abu Dhabi, Dubai and Sharjah International Airports, a statement from the FTA said.

As of mid-December, the system will be fully operational to include all airports and land and seaports in the UAE as stipulated in the Cabinet decision. The government says the move aims to strengthen the UAE’s position as a major global tourism destination.

The FTA explained that tax invoices issued starting from November 18, 2018, will qualify tourists who are eligible for a tax refund to reclaim taxes incurred on their purchases.

FTA Director-General Khalid Ali Al Bustani said in the statement that more than 4,000 retail outlets across the UAE will be connected electronically to the system, clarifying that only the invoices issued by retail outlets registered in the scheme and connected to the system are eligible for a refund.

These eligible outlets can be identified with posters displayed on their storefronts and visible to visitors, he said.

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VAT on entertaining staff ‘non-recoverable’: Tax authority

The Federal Tax Authority has clarified the law on gifts, parties

Entertainment services supplied to employees, such as staff parties and retirement gifts, should not be exempt from Value Added Tax (VAT), the Federal Tax Authority (FTA) has said.

The authority noted in a statement posted on its website Monday that according to the federal law on VAT, the five per cent tax 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.

 Examples of these gifts include long service awards, Eid gifts and gifts for other festivals and special occasions, or a dinner to reward service.

The clarification issued by the FTA is the latest in a number of statements regarding various technicalities surrounding the tax system.

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, access to shows or events, or trips provided for the purposes of pleasure or entertainment.

Meanwhile, the FTA added that for VAT registrants who are not designated government entities, input tax cannot be recovered if it is incurred providing entertainment services to customers, potential customers, officials, shareholders, or other owners or investors.

Khalid Ali Al BustaniFTA Director-General Khalid Ali Al Bustani said in a statement that if a designated government entity provides entertainment services to anyone not employed by the entity, it will be able to recover the input tax incurred on those costs.

This exception pertains only to entertainment services provided to non-employees, including meetings with delegations from other countries where lunch or dinner is provided, meetings with representatives from other government entities to discuss official business, where refreshments are provided, or ceremonies held to mark significant political events.

However, all companies, including designated government entities, which provide entertainment services to its employees, are prevented from recovering any VAT included on such costs.

There are a handful of circumstances in which a taxable person is entitled to recover VAT on such costs, including where it is a legal obligation to provide those services or goods to those employees.

As for employee expenses, the authority outlined certain circumstances where a taxable person will fund or reimburse an employee for certain costs that the employee incurs for business purposes, in the course of performing his/her role. These include cases where an employee is on a domestic business trip and requires overnight accommodation, the VAT incurred on hotel costs, for example, would be recoverable.

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Bahrain parliament approves VAT agreement

Dubai: Manama: Bahrain is set to become the third Gulf Cooperation Council (GCC) to implement the unified agreement on Value Added Tax (VAT) on goods and services.

On Sunday, the kingdom’s bicameral parliament, holding an extraordinary session upon a royal order issued last week, approved VAT at the rate of five per cent effective from January 1 next year.

The lower and upper chambers of the parliament also approved new pension rules for ministers and members of the Council of Representatives, the Shura Council and the Municipal Council.

VAT and changes to the pension system are part of efforts to fix public finances hit hard by the drop in oil prices which also pushed Bahrain’s dinar to its lowest in more than a decade.

In February, Bahraini Minister of Finance Shaikh Ahmad Bin Mohammad Al Khalifa said that Bahrain would introduce a VAT and would have everything set up by the end of 2018.




The claim may only be made by a natural person who is a UAE National


To support the refund claim, a series of documents is required, including for example:

  • documentary proof to support that the applicant owns the specific plot of land in the UAE;
  • documentary proof to support the date the building is certified as completed;
  • documentary proof of the total refundable VAT that has been paid, issued by any of the verification bodies which are authorized by the FTA for this purpose.


  • Request the verification body to issue a verification report
  • Submit an application form to the FTA accessible via the FTA website


The Refund Form must be lodged within 6 months from the date of completion of the newly built residence which is the earlier of the date:

• the residence becomes occupied; or,

• when it is certified as completed by a competent authority in the UAE, as stipulated by the FTA.

Please factor in the time it will take to apply for and receive a verification report.

Criteria relating to the usage of expenses

• Expenses must relate to a newly constructed building which is to be used solely as a residence of the applicant and / or his / her family.

Criteria relating to the nature of expenses

Services provided by contractors, including services of builders, architects, engineers, and other similar services necessary for the successful construction of residence.

Building materials, being goods of a type normally incorporated by builders in a residential building or its site, but not including furniture or electrical appliances

ARE THERE ANY FEES FOR THE REFUND CLAIM? The FTA will not charge any fee to process your refund application. However, may be incurred a service fee from the verification body.

VAT Tourist Refund | Now You Can Get Back the VAT You Paid in the UAE

When will VAT refund scheme for tourists be applicable in the UAE?

The Federal Tax Authority – Federal Tax Authority (FTA)  has declared that Tax Refund Scheme for tourists will be initiated from November 2018. In this scheme, tourists will be able to avail for the VAT refund if they shop from retailers who are registered for Tax Refund Scheme under tax refund scheme for tourists.

When can retailers register for VAT Refund Scheme for tourists?

Retailers registered for VAT under FTA  can start registering for Tax Refund Scheme for tourists from 10th September 2018. Briefing from the FTA related to the above will be held in Abu Dhabi on September 11th, 2018 and subsequently in Dubai.

What are the conditions to avail VAT Refund Scheme for Tourist?

  • Goods should be bought by the tourist in the UAE.
  • Tourist visiting the UAE must exit UAE within 90 days from the date of shopping along with the items bought.
  • In order to get the VAT Refund, tourists should be sure only to buy from registered businesses for tourist refund scheme in the UAE.
  • FTA will lay down the procedures to be followed to avail VAT refund to the tourists.

Where can tourists avail refund of the VAT they paid for their shopping?

The tourist can refund the tax they paid for their shopping only from the outlets and point of sales which are registered under the Tax Refund Scheme for tourists.

There will be designated places where the tourists will be able to avail their VAT refund scheme through an electronic system. A digital machine will be able to determine the taxes that are eligible for refund and then the tourists shall be paid accordingly.

How to treat the amount refunded to the tourist under Tax Refund Scheme for tourists in your VAT Form 201?

Under VAT Form 201, Box No. 2 you can find the column provided for Refunds of the tax you have paid to the tourists under the Tax Refunds Scheme for Tourists.

This box can be used only by retailers who are refunding tax to the tourists in the UAE, under the official tourists refund scheme. The box should include the figures of all the tax refunds given to the tourists under the tax refunds for tourist refund scheme. It will be always a negative figure which means it is a refund you are making from the FTA.


UAE VAT Law on Tourist Scheme. {Source ~ Federal Decree-Law No (8) of 2017 on Value Added Tax}

As per the Article 68 Clause 2 of Executive Regulations of the Federal Decree-Law No (8) of 2017 on Value Added Tax following conditions shall apply to the Tax Refunds Scheme for Tourists:

  1. The Goods which are subject to the Tax Refunds for Tourists Scheme must be supplied to an overseas tourist who is in the State during the purchase of the Goods from the supplier.
  2. At the Date of Supply, the overseas tourist intends to depart from the State within 90 days from that date, accompanied by the Goods.
  3. The relevant Goods are exported by the overseas tourist to a place outside the Implementing States within 3 months from the Date of Supply, subject to such conditions and verifications as may be imposed by the Authority.
  4. The phrase “overseas tourist” means any natural Person who is not resident in any of the Implementing States and who is not a crew member on a flight or aircraft leaving an Implementing State.
  5. The Authority may publish a list of Goods that shall not be subject to Tax Refunds for Tourists Scheme.

Refund of the excess recoverable tax amount – Form VAT 311.

There is a confusion in the market that the form VAT 311 available can be used for Tax Refund Scheme for Tourist, which is incorrect. If one has to refund to the tourist the tax amount they paid against their purchases, the retailer or the point of sale should be registered under Tax Refund Scheme for tourists. Then, the amount they pay back to the tourist can be claimed back through form 201 – Box No. 2.

After submitting the form 201, if the registered person is in a net recoverable position an option will be available in the VAT Return to request a refund for the excess recoverable tax amount.  If he selects “Yes” for the refund, he has to complete the VAT Refund Application Form VAT 311. This is done after submitting the VAT Return for the respective tax period. If he selects “No”, the excess recoverable tax amount will be carried forward to the subsequent Tax Periods. This can be used to offset against tax liability or penalty arising in future or can apply for refund later. Nowadays, there is a requirement to submit a bank account validation letter / certificate along with the form 311.

Labour Accommodation for VAT purposes

What is the treatment of Labour Accommodation for VAT purposes?

Labour Accommodation: Some of the labour accommodation will be treated as supply of residential property, and some of the labour accommodation will be treated as supply of serviced accommodation.

If the labour accommodation is considered as supply of residential property it will be treated as zero percentage or exempted. If additional services are given to a labour accommodation it will be treated as serviced accommodation and will be taxable at 5%.

However, the following basic services shall not be considered as part of serviced accommodation:

  • cleaning of communal areas
  • maintenance services required for the general upkeep of the property
  • pest control
  • garbage collection
  • security
  • utilities e.g. electricity, water, etc.

Profit Margin Scheme

What are the recent clarification issued on Profit Margin Scheme?

Profit Margin Scheme: Only those goods which have previously been subject to VAT before the supply may be subject to the profit margin scheme. As a result, stock on hand of used goods which were acquired prior to the effective date of Federal Decree-Law No. (8) on Value Added Tax (“VAT law”), or which have not previously been subject to VAT for other reasons, are not eligible to be sold under the profit margin scheme.

VAT is therefore due on the full selling price of such goods.

Foreign Currency Exchange Rate for VAT purpose

How to record currency Exchange Rates in your books of accounts?

Exchange Rates: Article 69 of Federal Decree-Law No. (8) of 2017 (“VAT Decree-Law”) requires that where a supply was made in a currency other than UAE Dirham that the amount stated on the issued tax invoice should be converted into the UAE Dirham according to the exchange rate approved by the UAE Central Bank at the date of supply.

The UAE Central Bank began publishing exchange rates on 17 May 2018. Businesses are required to use UAE Central Bank rate on any tax invoice issued in a currency other than the UAE Dirham from this date onwards.

Any tax invoices issued in a foreign currency prior to 17 May 2018 should have been converted to UAE Dirham using a reliable source for exchange rates such as Oanda, Thomson Reuters, UAE Bank Rates etc.

There will be no need to rework tax invoices issued prior to 17 May 2018, provided they used exchange rate from any of the reliable source consistently.

Voluntary Disclosure form 211 – When is required to be filled ?

When to use Voluntary Disclosure Form 211?

Voluntary Disclosure Form 211:  A Voluntary Disclosure is a form provided by the Federal Tax Authority if the Taxpayer notifies an error or omission in a Tax Return, Tax Assessment or Tax Refund application.

Voluntary Disclosure form need not be used if the underpaid tax amount is AED 10,000/- or less. It can be corrected through the Tax Return for the tax period in which the error has been discovered (i.e if the error occured in a particular quarter was found in subsequent quarter , the same can be rectified in the subsequent quarter when identified , no for required)

If the unpaid tax liability is more than AED 10,000/- it can be rectified using voluntary disclosure form 211.