The UAE has been considered a tax haven for many individuals and businesses, particularly due to its favourable tax regime. Aside from imposing no tax on personal income and personal assets, it only applies a 5% VAT on goods and services, and as low as 9% corporate tax—one of the lowest rates across the world! This is the reason why numerous entrepreneurs, the wealthy or high net worth individuals are drawn to this country. The government is keen to make doing business and living or retiring here as favourable as possible.
In addition, the government also allows easier ways to get VAT refunds for various types of entities, individuals, and organizations—giving them financial relief and attracting them further to invest in and set up a home in the country.
But how exactly do their VAT schemes usually work? We have laid out for you the different types of VAT refunds that exist in the UAE to help you understand how these regimes work.
VAT Refund for Taxable Persons in the UAE
It is obligatory for taxable persons—whether a business, sole trader, or a professional carrying out any economic activity in the country—to file returns at the end of each tax period. Aside from being compliant to the laws and regulations, this also allows them to apply for VAT refund whenever they have a VAT credit. This is provided that the input tax is greater than output tax on a VAT return.
According to the Federal Tax Authority, here are the steps to claim for VAT Refund:
VAT Refund for Business Visitors
This specific Refund Scheme helps business visitors make a claim for refund of VAT settled on the products or services purchased in or from the UAE. The period of each refund claim is 12 months (hence at the earliest after the end of each year). The minimum amount of each refund claim to be submitted will AED 2,000.
Criteria for VAT Refund
VAT refund for Tourists
Even the tourists and visitors can enjoy the UAE’s favorable tax refund scheme. These individuals can get VAT refund for their travel purchases in the UAE, through a special device placed at their departure port (airports, seaports, or border ports). They just need to submit the required documents and they can recover VAT from 4,000 participating retail outlets across the UAE.
Criteria for VAT refund
According to the Federal Tax Authority, for a tourist to claim VAT refund on purchases he made in the UAE, he must fulfill certain conditions:
VAT Refund for Exhibitions and Conferences
With the aim of enhancing the country’s status as a hub for Meetings, Incentives, Conferences & Exhibitions (MICE), the UAE has allowed businesses or suppliers involved in the industry of exhibitions and conferences to also claim for refund of the VAT charged to their global customers. The scheme is made to guarantee ease of doing business, and to take the burden of tax costs from international customers.
VAT Refund for UAE Nationals on New Residences
To provide UAE Nationals monetary relief from building a new residence in the UAE, the government has introduced a refund scheme on VAT incurred on their construction costs.
VAT Refund on Charities in the UAE
This VAT refund scheme, amended according to the Capital Assets Scheme, allows certain charities to recover all input tax they paid on their services and supplies. These organizations often create a blend of supplies of products and services where VAT law differ, so if such goods are supplied for a charge, FTA shall deem it as a business activity.
However, tax paid for goods used for making exempt supplies (products or services where the supplier is prohibited from charging VAT), are excluded from this recovery.
VAT Refund for Mosque construction and operation
The Federal Tax Authority (FTA) in October launched an easier mechanism for the refund of VAT incurred on building and operating mosques. The mechanism includes refunding VAT incurred on mosques on FTA’s e-Services portal, which was formed as a result of the Cabinet Decision No. (82) of 2022 in a bid to offer financial help to mosques—considered the most important place of worship for the progressive Arab nation.
Criteria for VAT refund