VAT ALERT (UAE): TAX REFUNDS FOR TOURISTS

The Federal Tax Authority (FTA) of UAE issued its cabinet decision number 41 of 2018 regarding introduction of tax refunds for tourist scheme.

This decision is in continuation to the Tourist Refund Scheme (TRS) which was issued earlier on 24th July 2018 providing proper mechanism for the same. 

As per the previous announcement of FDA the effective date of TRS is November 2018 and the retailers are supposed to register themselves from 10th September 2018 in order to be included in the said scheme.

The key points of the cabinet decision are as under:

The Chairman of FTA will announce the official date for implementation of the FTA before 1st January 2019;

A person will be eligible to obtain the refund as per TRS if the following conditions are met:

i) Conditions laid down in article 68(2) of the the Executive Regulations;

ii) The goods must be purchased from a retailer registered with the TRS;

iii) The purchase or export of goods must fulfill the requirements laid down by the chairman; and

iv) The goods have not been excluded from the TRA by the FDA;

Following are the key points of the mechanism explained for claiming the refund:

i) In order to refund claim the retailer needs to provide the tourist the necessary documentation for TRS along with a tax invoice as per article 59 of the executive regulations;

ii) Refund cannot be claimed from a retailer. In order to claim refund by the tourist he is required to approach directly the Operator of TRS;

iii) The tourist maybe required to present the goods for inspection in order to claim refund; 

iv) The operator of TRS can charge the tourist an administration fees not exceeding the limit specified by the TRA;

v) Once the operator correctly issues the tax refund to the tourist the operator can then obtain reimbursement of that refund directly from the retailer who sold goods to the tourist;

vi) After the amount of refund has been reimbursed to the operator by the retailer the retailer can then declare the tax amount as a reduction of output tax in the said tax period in which the refund was paid and the same shall be reported in the dedicated box on the VAT return.