Category: VAT

The Federal Tax Authority  (“FTA”) has released Public Clarification VATP017 “Time-frame for recovering Input Tax”.  VATP017 clarifies the FTA’s position on when input tax may be recovered through the VAT return, and the recourse available to the taxable person where input tax is not recovered within the prescribed time period.
 
Recoverable input tax must be recovered in the first tax period when the two conditions
below are satisfied (referring Article 55(1) of the VAT Law):

1. The taxable person has received a tax invoice; and
2. He intends to pay the consideration for the supply before the expiration of six
   months after the agreed date for the payment of the supply.
    
   

   When the taxable person receives a tax invoice, the input tax can only be recovered in the tax period when an intention to pay is formed within a prescribed period. Some businesses have internal approval processes that must be completed before payment of an invoice.  VATP017 clarifies that the taxable person’s intention to make the payment only crystallizes when the internal invoice approval process is complete and an intention to make payment within the prescribed period is formed.
    
   Therefore, before a taxable person can recover recoverable input tax, he must hold a tax invoice and satisfy the condition that he has formed an intention to pay within the prescribed period of time.
    
   An additional requirement under Article 55(1) of the VAT Law is that input tax must be recovered in the first tax period when the two conditions above are satisfied.  Where the taxable person fails to recover the input tax in this tax period, the recoverable input tax

may be included on the tax return for the subsequent tax period.  Where the input tax is not recovered in either of the two eligible tax returns, the input tax will be out of the scope of the time for recovery through the VAT return, and will require submission of a voluntary disclosure to recover it.
 
VATP017 also clarifies the position where the taxable person has recovered the input tax on the tax return but has failed to make the payment before the expiration of six months after the agreed date of payment.  The taxable person should reduce his input tax by the unpaid amount in the tax period that corresponds to the expiry of the six month period.  This input tax will be recoverable once the taxable person has made the payment.

Foreign businesses may also recover the VAT they incur when visiting the UAE.

As per Article 67 of Executive Regulations of UAE VAT Law, businesses/ business visitors to claim VAT paid on the purchase of goods and services incurred in UAE.

A non-government foreign business may obtain a refund on VAT paid in UAE by submitting the refund request for business visitors as prescribed by the Federal Tax Authority.

Terms/Conditions to reclaim refund by business visitor:

1. Input tax is not recoverable in case of entertainment expenses/ motor vehicles or other expense incurred for personal use.
2. Claim is not applicable to non-resident tour operators in UAE.
3. Foreign business cannot claim refund if business makes taxable supply in UAE.
4. The foreign business should be from the countries with reciprocal arrangement with the Ministry of Finance (List of the countries enclosed at the end)
5. The business should not have a fixed establishment and not carrying any business in UAE and is not a taxable person in the UAE.
6. They are carrying on the business and are registered with a competent authority in the jurisdiction in which country they are established.
7. Minimum amount of claim should be 2000 AED.

Steps to file for Refund VAT for Business Visitors in UAE

1. Sign Up with FTA portal-eservices.tax.gov.ae
2. Add company details in the registered mail id portal.
3. Submit the refund form
4. All documents required for refund as discussed above should be sent to The Federal Tax Authority the document should reach within one month from refund request submission.
5. Refund form will be processed within 4 months by the FTA
6. Once request is approved, refund is issued within 10 working days.

Below mentioned are the details required for submission of a refund request –

• Proof of incorporation in the respective country of establishment.
• Tax registration certificate of the respective country (if any).
• Bank Account details
• Copy of passport of the authorized signatory.
• Proof of authority of the authorized signatory.
• Original Tax invoices with proof of payment.

What are the important guidelines issued from the Federal Tax Authority to submit the refund request for Business Visitors in UAE?

The below mentioned guidelines issued by the authority with regard to refund request submission are as mentioned below:

• All the documents are preferred to be in original hardcopy with proof of payment. No softcopies are entertained, which will lead to rejection of refund request.
• As stated above, the hardcopies of invoices and other documents shall be sent to the Federal Tax Authority within one month of submission of the refund request along with the printed request form with the refund submitted reference number and a sufficiently pre-paid envelop having the name and details so as to return the documents after verification.

In the case of a company that has multiple number of branches, the Refund is only available to the branch(es) which is / are established in a country with a reciprocal arrangement in place. Refunds will only be paid to a bank account in the eligible country and the bank account must be in the name of the applicant / Foreign Business.

Below mentioned are the list of countries approved for the VAT refunds for Business Visitors with reciprocal agreement as at September 2019.

Following are the fully applicable country lists-

If the visitor is from a country not in the above list, or does not have a VAT system, it is required by the visitor to contact the Ministry of Finance of the respective country, which would have to contact the UAE Ministry of Finance for inclusion in the approved list.