The addition of Value Added Tax (VAT) to the taxation process has impacted businesses from all around the world. UAE was considered a lucrative place for conducting business as there were no taxes for the companies that are registered in the jurisdiction. But even with the 5% tax, the Middle East is still one of the best places to set up a business.
The UAE Government took this step to reduce its dependence on the Oil and Gas sector. The introduction of Value Added Tax (VAT) has helped the government generate a new source of revenue for the government. This source contributes to almost 3% of the economy of the United Arab Emirates.
Impact on Businesses
It is not that the businesses will not be profitable after the 5% tax which is levied due to VAT, and even in this, the businesses have to register for VAT. There are three different categories of Businesses that have to register themselves for VAT, and these have been categorised on the basis of the taxable supplies or turnover of the business.
With the filing for VAT, there comes Filing for VAT refunds which every business or individual is doing in the United Arab Emirates. To understand the VAT refund, first, we must understand what Input VAT and Output VAT is.
Input VAT can be described as the amount which is to be paid to the supplier on the purchase of the goods for the business, whereas Output VAT can be described as the amount which is received for the sales of the final goods.
How can you Claim a Refund for your Business?
All the businesses which have been registered in the United Arab Emirates need to file a VAT return in the UAE. While filing for VAT, the business must provide all the necessary information about the Input VAT and the business’s Output Vat.
If the input VAT is lesser than the Output VAT, whatever the difference is must be paid to the Federal Tax Authority (FTA), but if the case is opposite, meaning that the Input VAT is higher than the Output VAT, then, in that case, the extra amount can be claimed by the business owner. If the business does not reclaim this VAT, this amount can be carried forward to the next business tax period.
A business can register and file for vat on the Federal Tax Authority’s portal (FTA). Here is a step-by-step process for a vat refund for:
- Login to the E-Portal of the FTA
- Navigate to the ‘VAT’ tab and from there, click on the ‘VAT refund’ tab.
- On clicking the tab, a refund form will open. Fill out the necessary details in the form. Most of the details of the tab are self-populated except the following:
- The legal name of the Entity and the TRN
- Amount of Excess Refundable Tax
- Amount wanted to be refunded
- Remaining Amount of Refundable Tax
- Late Registration Penalty (if applicable)
After filling in all the necessary details, click on the submit button. You will receive a notification about the result of your application. After your claim for the excess tax is approved, your amount is refunded.
The businesses in the United Arab Emirates can file for a refund only if the business is registered for VAT and charges only 5% VAT. If any inappropriate amount of Vat is charged on the Goods and Services (other than 5%), then the company will not be eligible to file for a VAT refund.
Understanding the Value Added Tax (VAT) can be difficult for some businesses and may require external assistance. If you want to understand more about VAT in the UAE, then you can have a chat with our experts at JAXA Chartered Accountants.
JAXA is a reputed Chartered Accounting firm and provides various services such as Accounting and Auditing, Bookkeeping services, VAT and Tax related services, and many others. The experts at JAXA will understand the requirements of your business and provide a solution to you accordingly. To know more about all the services of JAXA, feel free to Contact Us. We will be glad to assist you.