Tourist VAT Refund Scheme- Guide for UAE Retailers
By Alia Noor, FCMA, CIMA, MBA, Oxford fintech programme, GCC VAT Comp Dip,COSO Framework.
Associate Partner Ahmad Alagbari Chartered Accountants, UAE
VAT refund scheme in UAE makes it possible for eligible tourists to receive a portion of VAT as a refund for products bought at registered stores. VAT amount can be claimed from an electronic system, at designated spaces, without any human interference. Once tourists submit the required documents, the digital system decides whether the taxes are eligible for refund and if yes, reimburses the tourist via cash or credit card.
BENEFIT TO RETAIL STORE TO JOIN THE SCHEME?
“Tax Free Shopping*” will help attract international travelers. It will increase retailers share of international traveler spend.
*Tax Free Shopping is the purchasing of goods in the UAE which will be exported (subject to terms and conditions) whereby shoppers can obtain a refund on the VAT on these items, providing that they validate their purchases according to local rules. The scheme’s integrated system enables direct connection to all outlets and shops across the UAE.
WHICH TOURISTS ARE ELIGIBLE FOR SCHEME?
Tourists Should meet the following criteria to become eligible for a VAT refund.
- Tourist must be above the age of 18 years and not resident in the UAE.
- Crew members on flights leaving the UAE are not eligible to claim.
- GCC Nationals are eligible. Please note that there may be restrictions on UAE nationals who are resident abroad for the purposes of studying.
All taxable goods are eligible for tax refunds except for:
- Goods that have been consumed, fully or partly, in the UAE or any Implementing State;
- Motor vehicles, boats and aircrafts;
- Goods that are not accompanied by the Overseas Tourist at the time of leaving the Emirates.
- The minimum purchase amount is AED 250.
- Once a Tax Free Tag is issued, the tourist has 90 days from the date of issuing to export the goods. If not done, the Tax Free Tags will expire and the refund will not be made.
Refund Amount and Fees
Tourists will receive 85% of the tax paid, minus a fee of 4.80 AED per tax free tag validated. Maximum limit for cash refund is AED 7,000 per tourist.
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PROCEDURE FOR RETAILERS TO JOIN THE SCHEME
- Need to submit request to join the scheme online and be subject to a credit check
- Issue a sales receipt at the point of sale and affix a Tax-Free tag
- Adjust the VAT applicable under tourist refund scheme while submitting the VAT return
1-Four Conditions for Retailers Registration under Scheme
The following are the conditions identified for registering under the tourist refund scheme.
- The retailer must be registered with the Authority for VAT and have a tax registration number (TRN)
- The supplier’s sales of goods must not be excluded from the refund scheme, as determined by the Authority
- The retailer must submit a request to participate in the Scheme as determined by the FTA
- The retailer must meet the financial credit requirements specified by the system operator and be committed to submitting Tax Returns and paying due taxes regularly
How the system works:
Step 1: A tourist makes a purchase eligible for a “Tax Refund”
Step 2: The retail store captures tourist information using the system
Step 3: The retail store enters the transaction purchase price
Step 4: The retail store generates a QR code tax free tag and attach on the back of the sales receipt.
Step 5: The retail store scans the QR code to link the transaction with the tourist’s passport details
Step 6: Tourist will present sales receipt at any Tax Refund Kiosks in airport, seaport or border crossing. (Please note that the tourist may be subjected to a further validation check and may need to produce the goods for inspection.)
2-Who can issue Tax Free tags?
- Any retailer registered for VAT with FTA, and who is regular in filing the return and paying due tax to authority
- Seller of goods eligible to receive tax refunds as determined by the FTA
Issuing a Tax Free Tag
Planet will offer 3 ways to issue a Tax Free Tag to eligible tourists:
- Through an app downloaded to a mobile phone
- Through a web application on a computer browser
- Integration with selected POS software and payment providers
All issuing solutions must collect the following data when a tag is issued:
- Tourist details (ID number & country of residence as a minimum)
- Transaction details (Receipt no. & full sales amount including VAT)
- Tax Free Tag ID (Stickers with tag IDs are provided in the starter pack)
3-VAT Return Filing – Tax Refund for Tourists Scheme
Tax Refund for Tourists scheme is applicable only for businesses who are registered and enrolled under the official tourists refund scheme.
- Upon the sale of goods, the Retailer issues a sales receipt with the tax refund tag affixed to the back to tourists and account for output VAT accordingly.
- The Overseas Tourist requests their VAT refunds directly from the Operator and Operator shall seek reimbursement of the VAT amount refunded to the Tourist directly from the Retailer who sold the goods.
- Retailers shall reimburse the VAT amount to the Operator, and adjust the amount as a reduction of output VAT that arises in the tax period in which the refund was paid, under Box 2 of the VAT return.
- Box-2 refers to the amount of the tax refunds made available to visitors under the “tax refunds for tourists scheme”. Mention the tax amount that has been refunded to the tourists under the column ‘VAT Amount.’
- Within this box, the number reported should always be negative. This sum would reduce the overall liability of output tax.
- Businesses who are not registered and enrolled under official tourist refund scheme, the box 2 will not be applicable. In such case, mention nil values (0) which are auto-populated.