What is a VAT refund?

All registered companies must submit a VAT return to provide sales details and purchase output VAT and input VAT paid during the tax period. Here, the output value-added tax is the amount charged in sales, and the input value-added tax is the amount paid to the supplier at the time of purchase/spending. The qualified input VAT amount will be allowed to be adjusted with the output VAT amount. After adjusting the output value-added tax and the input value-added tax, the result will lead to one of the following situations.

VAT payable: If the output VAT amount is greater than the input VAT, the balance is the VAT payable and needs to be paid to the FTA.

Refundable Value Added Tax: If the output value added tax is less than the input value added tax amount, the excess value will be refunded to the value added tax.

How to refund VAT in accordance with UAE VAT?

Taxpayers have the following two options to deal with excess input VAT, usually referred to as refundable VAT:

1. The taxpayer will be eligible to claim the VAT refund

2. If he does not wish to request the refund of the excess input value-added tax, the excess recoverable tax will be carried forward to a later tax period and can be used to offset the tax and/or fines due, or he can apply for a slight Refund at any time after

How to apply for a tax refund?

If you enter too much VAT, there will be an option on the VAT refund form to request a refund.

How to apply for a tax refund

As shown in the figure above, you need to select “Yes” in the box number. 15 “Do you wish to request a refund for the above-mentioned excess recoverable tax”. If you choose “No”, your excess recoverable tax will be carried forward to a later tax period and can be used to offset tax payables and/or penalties.

After submitting the VAT return, you need to fill in the VAT refund application form “Form VAT311”. Here are the steps to submit the VAT refund form “VAT311”:

1. Use your username and password to log in to the FTA electronic service portal

2. In order to access the refund form, please navigate to the “VAT” tab and then to the “VAT refund” tab

VAT refund requirements

3. Click “VAT refund application”, as shown in the figure below:

VAT refund requirements

4. After clicking “VAT refund application”, the refund form will open. Fill in the details in all applicable fields. In order to submit the refund form, the required fields must be filled in. Most details are automatically filled in. The following are the fields available in the VAT refund form 311:

a.TRN, the legal name of the entity (English), etc.: This section is automatically filled in based on the information contained in your account user profile. Therefore, the correctness and accuracy of the information contained in the personal data is very important. Please check before filling out the refund form

b. Total Excess Refundable Tax (AED): This field is automatically filled in based on the excess refundable tax reported in the last value-added tax return minus the administrative penalty payable (the overdue registration penalty is displayed separately)

c. The amount you wish to refund (AED): Please enter the amount you wish to refund here. This amount must be equal to or less than the “total refundable tax”

d. Remaining amount of eligible refundable excess tax: This field is automatically filled in and represents the remaining amount of remaining refundable tax that you can apply for a refund in the future.

e. Late registration penalty amount (calculated in AED): This field will be automatically filled according to whether you have implemented a penalty and settled the late registration penalty for VAT. The following table provides details of when the amount is displayed in this field:

Number of scenes

If you are not fined zero

If you have been fined and paid a fine of zero

If you have been fined but have not received a fine of 20,000 when you request a refund

f. Authorized signatory and declaration: The authorized signatory will be filled in automatically, you need to check the declaration before submitting

5. After completing the form, click the “Submit” button, as shown below:

VAT refund form submission

The refund form will be processed within 20 working days after submission. You will receive an email notification from the FTA regarding the result of your application. After your claim is approved, the money will be refunded within 5 working days. You will receive a refund confirmation email, and you can check the balance in the “My Payment” tab -> “Transaction History” section, showing the refund amount.

BUSINESS VAT REFUND SCHEME IN UAE VAT

In accordance with the UAE’s value-added tax, the Free Trade Agreement has designed a program for business travelers to the UAE, requiring the refund of the value-added tax incurred in the UAE. This is similar to the corporate value-added tax refund program provided by the European Union. Let us learn more about the UAE’s corporate value-added tax refund program.

What are the corporate value-added tax refund programs in the UAE?

According to the corporate value-added tax refund scheme, as long as the conditions are met, foreign companies can request a refund of the value-added tax paid for expenses incurred in the UAE.

What is a foreign company?

A foreign company refers to any company registered with the competent authority of its jurisdiction.

How can foreign companies qualify for tax refunds?

Under the following circumstances, foreign companies can apply for a VAT refund under the corporate VAT refund plan:

a. The company is located in a GCC state that has not yet implemented VAT

Companies that live in GCC states and have not implemented VAT are eligible for the corporate VAT refund program. Currently, only the UAE and KSA have implemented VAT in the Gulf Cooperation Council. Therefore, companies residing in other Gulf Cooperation Council countries are eligible to participate in the program.

Either

b. Is engaged in foreign business in a country/region other than GCC and meets the following conditions:

Should be registered as an institution in the competent authority of its jurisdiction

Foreign companies should register with relevant agencies as business premises within their jurisdiction.

No business office or fixed business office should be established in the UAE or other countries/regions that have implemented VAT

Foreign companies should not have business offices or fixed business offices in the UAE or countries that have implemented value-added tax (ie the current KSA)

No business office or fixed business office should be established in the UAE or other countries/regions that have implemented VAT

Foreign companies should not have business offices or fixed business offices in the UAE or countries that have implemented VAT (ie currently KSA)

Should not be taxable

Taxpayer refers to any person who is registered under UAE VAT or is obliged to register under UAE VAT. Companies that require the refund of VAT under the Corporate VAT Refund Scheme should not become taxpayers under the UAE VAT. To understand who should register under VAT in the UAE, you can refer to our article “Who should register under VAT”.

Should be from a country that refunded VAT to UAE entities under similar circumstances

It is essential that foreign companies should come from countries that refund VAT to UAE entities under similar circumstances.

Note: The required tax should not be related to goods or services for which the tax cannot be recovered. According to UAE VAT, certain supplies are not eligible for input tax recovery. To learn more about these supplies, please refer to our article “Supplies Not Eligible for Input Tax Recovery”. Foreign companies that require tax refunds under the corporate value-added tax refund plan should ensure that they have nothing to do with goods or services for which tax cannot be recovered

Who is not eligible for tax refund in accordance with UAE VAT requirements?

Foreign travel agencies are not eligible to claim tax refunds under the corporate value-added tax refund program.

Therefore, the corporate value-added tax refund program is an attractive program for foreign companies coming to the UAE. Although the framework of the VAT refund plan has been formulated, it has not yet been launched. Therefore, details of the exact process for requesting a refund under this program are not yet available and will be provided in the future.