With the influx of more than 25 million visitors expected from around 190 countries for Expo 2020, the UAE FTA has implemented two special VAT refund mechanisms to ensure that business visitors do not incur any VAT.
The first mechanism targets exhibitions and conferences attended by international businesses. The second one benefits business visitors who will be able to claim the refund of VAT paid on expenses incurred in UAE. Below the two mechanisms are discussed.
VAT refund for exhibitions and conferences
The VAT refund for exhibitions and conferences is beneficial for the organizers as well as the business visitors attending such events in the UAE.
This scheme enables both suppliers and their international customers to save 5% VAT payment on selected services. This particular refund mechanism covers services such as the rental of exhibition space or access to exhibitions and conferences.
Only international customers, those who are not established in the UAE or are not registered for VAT purposes in the country, can avail this benefit. The international customer must inform the supplier that the business is not resident in any manner or registered in the UAE for VAT purposes.
The supplier, on the other hand, needs to be registered for VAT purposes in the UAE, as well as inform the FTA before the event takes place to be able to grant this benefit to its international customers.
Once registered, the conference and exhibition supplier should issue an invoice with VAT but not collect VAT on the relevant exhibition or conference services from their customers. Instead, he claims the VAT refund equal to the output VAT charged on the subsequent VAT return.
Since the payment of this VAT will de be deferred to the VAT return and compensated with a simultaneous deduction in the same return, it does not impact the supplier’s cash flow, while also providing the customers with immediate VAT refund.
Refund for business visitors
Similar to the business VAT refund scheme available in the European Union, the UAE has implemented a scheme whereby all VAT costs incurred by a non-resident business which are not registered for VAT in the UAE, are reimbursable through the VAT refund mechanism for business visitors.
Some of the most common expenses by non-residents include the local purchase of goods, employee travel and lodging, training, service charges for vendors and others. It is important to note that the VAT reclaimed must be directly related to the business activities and cannot be for entertainment or any other legally blocked expense, which are specifically excluded from all input VAT recovery.
Foreign business will only be entitled to claim a VAT refund in case they are from a country that has VAT and also provides refunds of VAT to UAE entities in similar circumstances. KSA currently does not provide this refund to UAE businesses. Therefore, the UAE will also not refund businesses from KSA.
The minimum amount of each application for refund of tax is AED 2,000 which may be the amount of single or multiple purchases. The application should be submitted by a calendar year. The FTA will start receiving claims in respect of VAT incurred in 2018 as from April 2019. The opening date for refund applications in subsequent calendar years will be 1st March.
The FTA will soon release further guidance concerning the exact process for claiming the VAT refund. However, it is expected that businesses will have to provide the original tax invoices for which they intend to reclaim the VAT as part of the application.
VAT obligations for non-resident business
Conferences and exhibitions generate significant opportunities for businesses to show their products and close some deals.
However, non-resident businesses who intend to sell goods or provide services during a conference or exhibition in the UAE might need to assess their VAT obligations in the country. For non established businesses, the obligation to register for VAT purposes with the FTA arises from the first taxable supply.
Importantly, non-resident businesses making taxable supplies in the UAE are not entitled to the business visitor refund scheme or to benefit from the VAT refund for exhibitions and conferences.
Overall, these guidelines will not only put UAE top of the list for the hosting of conferences and exhibitions, but it also encourages conference and exhibitions providers, as well as international customers to organize and attend such events in the UAE.
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