If a foreign business conducts any transaction within the United Arab Emirates, then the company is allowed to claim for Value Added Tax (VAT). This is done according to the rules and regulations as laid down by the Federal Tax Authority (FTA). This step was taken to make transacting in the United Arab Emirates more lucrative.
Recently, the Federal Tax Authority (FTA) revised the guidelines and stated new and changed conditions which will be applicable to a business if it wants to claim Value Added Tax (VAT). According to the new guidelines, the refund process will be applicable to foreign business entities which are from a county that allows the refund of VAT to UAE business entities.
This article will help you understand the new changes made to the VAT refund and will also help in understanding the time period and the documents required by a business.
Which businesses can apply for a VAT refund?
According to the rules and regulations stated by the FTA, not all businesses can apply for a VAT refund. The rules stated in the FTA are as below:
- The foreign business should not have a fixed establishment in the UAE or any of the implementing states. Here the implementing states means the GCC countries where VAT is implemented.
- A foreign business is eligible for a VAT refund only if it is not regarded as a taxable person in the UAE.
- A foreign business is eligible if it does not carry out any business activity in the UAE.
- A foreign business is eligible for a VAT refund if it carries out a business and is also registered with the relevant authority in the jurisdiction of their establishment.
These are the conditions that have been laid down by the Federal Tax Authority (FTA) complying with which the foreign businesses will be eligible to apply for a VAT refund.
Which businesses are not eligible for a VAT refund?
There are certain conditions which if fulfilled by a business, then they are not eligible to apply for a VAT refund. These conditions are mentioned below:
- The foreign businesses which make supplies that are taxable in the UAE are not eligible for applying for a VAT refund. They can become eligible if they can account for VAT according to the rules of the Reverse Charge Mechanism.
- If the input taxes which are incurred by a foreign business on the goods or services provided are not recoverable, then the business is not eligible for a VAT refund.
- If the origin country of the foreign business does not allow for VAT refunds to the United Arab Emirates then the business is not eligible.
- If a business is a tour operator in the United Arab Emirates and is not a resident of the country then it is not eligible for a VAT refund.
Documents required by a business for claiming VAT Refund
There are many documents which a business must prepare so that it can be eligible for a Vat refund. The management of a business should take the assistance of a Consultant so that they face no problems while claiming VAT Refunds in the United Arab Emirates. The documents required by a business are as follows:
- A copy of the passport of the authorized signatory
- Any proof of Authority of the Signatory
- Tax invoices with proof of payment as well as a TRN so that the claim of VAT refund can be supported. In case of any invalid tax, invoices are submitted, the FTA has the authority to reject the claim of the business.
- If a foreign business undertakes a non-business activity or an exempt activity then the business needs to submit a declaration that will underline the percentage of input tax that can be recovered by the business.
- The original Tax Compliance Certificates which are issued by the relevant authority need to be submitted. These documents can include certificates of commercial activity, business status certificates etc.
These are the documents that should be prepared by the business to be submitted to the Federal Tax Authority (FTA). The management should take the assistance of a finance consultant firm so that the business faces not problems during the filing of VAT Refund.
If you are looking for a firm that will help you in such matters, then you should look into the services provided by JAXA Chartered Accountants. To know about the various services provided by JAXA, Contact Us. We will be happy to help.