UAE is popularly known as the Gateway to the Middle -East and Northern African regions. The UAE and the Emirati governments' amiable business policies have resulted in UAE becoming the throttling business and investment hub. The UAE Government has introduced new VAT taxation, which will be an additional source of revenue for the infrastructure development to continue its growth and investment-friendly destination. There are several provisions under the UAE VAT law, of which Claimable VAT is one such provision.
VAT in the UAE
Value Added Tax (VAT) is generally a type of consumption tax on goods that will be added at each stage of value addition in the supply chain, starting from production, distribution to the point of the final sale. The total tax amount is calculated only for the value addition, i.e., the cost of the product minus the costs of materials used, already taxed at the point of purchase. Thus, VAT is estimated and collected at each stage which is different to a sales tax, charged to the consumer at the very end stage of the supply chain network.
UAE, along with the other members of the GCC group, introduced the VAT in 2017. The VAT has come into effect from 1st January 2018 in the UAE. The VAT rate currently is fixed at 5% for most of the goods and services offered in the country. There are certain goods with VAT taxed at a 0% rate and goods with complete VAT exemptions.
Under the UAE VAT law provisions, the suppliers of goods and services can reclaim the input VAT on the goods and services sold or qualifying activities. The input VAT is referred to as the tax paid by the supplier on the raw materials and related services used to make the product by the supplier.
Suppliers can reclaim the tax amount charged on goods and services used only for taxable supplies. The company must have valid VAT invoices or relevant Customs receipts as supporting documents at the time of the claim. All transaction records are a must to support tax claims.
A taxpayer must make a claim to reclaim the input VAT. The taxpayer is not entitled to reclaim tax used for producing VAT exempt supplies or any non-business activities. In cases where the input costs relate to taxable supplies and other non-claimable activities, the supplier can reclaim only the VAT amount used for taxable supplies. The taxpayer can apply for a VAT refund only after Filing VAT Returns.
After submitting the request to reclaim VAT, the Federal Tax Authority(FTA) will review and process the claim application within 20 business days of the application submission date. The taxpayer is duly notified of the FTA's decision to accept or reject the VAT claim. In certain exceptional cases, if the due process exceeds the standard timeline of 20 days from the date of submission, the FTA will accordingly notify the taxpayer regarding the extension.
How to Claim VAT refund in the UAE?
Please find the below steps to apply for a VAT reclaim.
- The taxpayer should log in to the UAE FTA's e-Services Portal.
- Under the VAT tab, in the VAT Refunds tab, access the 'Form VAT311' by clicking VAT refund request.
- The fields in Form include – Taxpayer TRN; Entity registered name in English; the total amount of excess refundable tax in AED; Amount the taxpayer wishes to have refunded in AED; the remaining extra amount of refundable tax; any late registration penalty in AED. Few fields in the Form are pre-populated using the details from an existing account. After a thorough check, submit the Form by clicking the' Submit' button.
- Upon successful submission, the taxpayer will receive a confirmation email from the FTA to notify the result of the refund application. Once the authority approves the required claim, the refund amount is processed to the taxpayer's bank account within five business days.
- The taxpayer can verify the refund status by checking the balance from the My Payment tab in the Transaction History section in the e-Services portal.
There are certainly exceptional cases where the taxpayer can process the VAT refund. For example, special VAT Refund procedures are applicable for business visitors and the UAE nationals involved in constructing new residential buildings in the country.
Jaxa Chartered Accountants are one of the pioneer accounting company the UAE. We have offices all over the country catering to the business requirements of UAE and international clients. Our consultants guide client companies in all aspects related to the VAT in the UAE, which includes VAT registration, invoices preparations, VAT payments, returns filing and refund claim submission. Please Contact Us for all VAT related matters. We'd be delighted to help!