It may be difficult for people who are unaware of the rules and regulations of taxation to understand as to how and why VAT refunds in the UAE are important and why VAT filing is needed. As far as an individual is concerned, the tax returns may not be of significant value when compared to the business owners because in the latter case, the stakes are higher and a slight mistake can lead to bankruptcy and liquidation of the business as well. Therefore, in this article, we will be throwing light on the VAT refund claims for businesses and how these can be done in a smooth way through VAT registration UAE.
It is best to hire an auditing firm to ensure that a business remains tax compliant and also, they can help you in identifying the tax deductions that might have been missed by a business. They can also help you in registering your firm for VAT with the FTA and then guide you through the process of a VAT refund claim.
In terms of the deductibles, if a business spends a significant amount of money on travelling for business purposes in the UAE, and some of these expenses include the Value Added Tax (VAT), then the business may be allowed for a VAT refund only if proper filing procedure has been followed by them.
Defining Value Added Tax and which businesses in the UAE are eligible for a VAT refund in the UAE?
Value Added Tax (VAT) is also termed as Goods and Services Tax (GST) is a consumption tax that is charged on the goods and services in most of the countries around the world including the UAE. It is calculated as a percentage of the net sales price of a product or a service. Under the current taxation system in the UAE, most of the non-resident business entities are eligible for a VAT refund on their expenses with only a few exceptions. Especially foreign businesses from the countries that allow VAT refunds to the UAE are qualified. The rebates are subject to the additional conditions that the FTA imposes. However, this is to be noted that the refunds on VAT payments are limited to a certain percentage. Therefore, things might get complicated, and one must consult a tax consultant in the UAE to have a smooth VAT return claim process.
The business transactions and expenses that qualify for the VAT refunds in the UAE
The foreign business owners are eligible to claim the VAT refund on the goods and services used for both business and personal purposes. However, there lies a lot more things to be discussed in this aspect.
For instance, services and products that are primarily used for personal use, even if they have been used for business purposes are exceptional. An example is a stationary or a computer. Similarly, VAT exempt business purchases that are used to create VAT-exempt products and services, and business entertainment costs are also exemptions. Second hands goods purchased have separate rules for VAT returns treatment. On the other hand, the eligible businesses can receive a refund for the following business expenses:
- Meals and accommodation
- Car rental and fuel expenses
Procedure to request a VAT refund in the UAE
The first and the foremost rule for applying for a VAT refund is that to file a VAT claim in the UAE, the filing must be done within a year of the purchase (12 months). However, businesses based in other Gulf corporation Council (GCC) countries are exemptions here. In addition to this, the VAT refund in Dubai claims must be worth AED 2000 at least in order to be eligible for consideration by the FTA.
The documents needed for VAT refund claim for businesses in the UAE are listed below: –
- Proof of payment and tax invoices are applicable and these must mention a valid tax registration number (TRN) – the businesses must ensure here that the TRN number must be validated by the UAE embassy in the country where the entity is registered to pay the taxes.
- The second document needed is a copy of the document that reflects the tax compliance and the TRN as issued by the tax administration body of the country where the business is registered and located. The acceptable submissions include a certificate of the business activities, a business status certificate, and other documents which may be applicable.
- Thirdly passport copy is needed. The authorized signatory must present his passport to the Federal Tax Authority. Proof of the authority as the authorized signatory also needs to be submitted.
Some other documents may be required, depending upon the type of business that you are having in the UAE and the home country. The claim can be also filed electronically with the FTA by sending the documents to them. This eliminates the need to send any physical documents and invoices to the FTA. Therefore, the procedure is quite simple for the people who understand the VAT refund claim procedure for business in the UAE. However, one must consult the tax experts in the region to avoid any issues and fines at a later stage.
How VAT registration UAE can help you in VAT refund claims for businesses in the UAE?
So, if you are not sure about how to go about with the VAT refund in Dubai claim for your business in the UAE, Experts, at Farahat and co. can be your friend in making the process smooth and easy. Experienced tax consultant in the UAE is aware of the latest rules and regulations that the FTA has set up with respect to the VAT. help you in all sorts of work right from registering your business for VAT, to VAT filing and conducting VAT health checks for your organization