The FTA has announced a proper mechanism for foreign companies visiting UAE for business purposes to claim a refund of the taxes paid by them on expenses in the country.
The scheme introduced by the Federal Tax Authority (the FTA) is more or less similar to the one already in practice in some European countries.Under the foreign Value Added Tax (the VAT) refund scheme, eligible foreign companies can claim a refund of VAT paid by them on expenses in UAE. However, there are certain conditions which need to be fulfilled.A foreign business, for VAT purposes, is any business that is authorized and registered with an eligible authority in the place where it is located.A foreign business can apply for VAT refund under this scheme as per the following rules:
1. Businesses situated in a GCC State where VAT has not been implemented yet
A business which is resident in a GCC State which has not implemented VAT is eligible for the business VAT refund scheme. Currently, only UAE and Saudi Arabia (KSA) have implemented VAT in the GCC. Hence, businesses which are resident in the other GCC States are eligible for this scheme.
2. Businesses situated in a country other than GCC States can claim a refund of VAT only if they fulfil the below conditions:
- The foreign business should be registered as an establishment with the relevant authority in its jurisdiction.
- The foreign business should not have a place of establishment or fixed establishment in UAE or a State which has implemented VAT (i.e. currently, KSA)
- Should not be a taxable person — A taxable person is any person who is registered under UAE VAT or who is obligated to register under UAE VAT. The business claiming refund of VAT under the business VAT refund scheme should not be a taxable person under UAE VAT.
- Should be from a country which provides a refund of VAT to UAE entities in similar circumstances.
The business VAT refund scheme is a really good option for those foreign companies that visit the country for business purposes. The official scheme for claiming the refund of VAT on expenses made by foreign businesses has not been rolled out yet this will be made available at a later date
