Author: Ujjawal Jain

Designated spaces will be provided where tourists can easily reclaim VAT in Dubai (UAE)

The UAE Cabinet has adopted a decision to implement the value added tax (VAT) refund system for tourists, which will integrate between retail outlets with tax refund points in line with the government’s efforts to achieve the efficient implementation of the tax system in the Dubai (UAE).

The Federal Tax Authority (FTA) on Saturday announced conditions and procedures for the tourists to claim their VAT refunds when exiting the country.

The Authority said the tourist needs to have purchased goods from retailers registered in the system which will go live soon.

It said designated spaces will be provided where tourists can easily reclaim taxes through a fully electronic system, without any human involvement.

“Upon leaving the country, the tourists will be able to reclaim taxes paid on their purchases in a fully electronic system. without any human involvement. The tourists shall submit the required documents and obtain a refund via credit card or in cash from the global operator,” the authority said on Saturday.

Khalid Ali Al Bustani, director-general, FTA, said the system operator will be signing agreements with retailers to provide them with the necessary technology to connect with the FTA, as well as with airports, land and sea ports of entry.

“Designated spaces will be provided where tourists can easily reclaim taxes. The digital system determines the taxes that are eligible for a refund and then reimburse tourists,” he added.

The UAE Cabinet last week endorsed VAT refunds for tourists from the fourth quarter which is expected to drive growth in the tourism and hospitality sectors.

The FTA revealed that the project is nearing its final preparation stages and the system relies on an advanced integrated digital system to set up a direct connection with points of sale, as well as with all UAE ports of entry, allowing the global operator to coordinate among retailers registered with the FTA, and enable tourists to submit refund requests for their purchases.

Anurag Chaturvedi, managing partner, Chartered House, said the UAE tax refund process is in line with global best practices where tourists will get the refund automatically credited to their bank account or credit card.

“Tourists will have to designate their preferred mode of settlements at the time of purchase and the merchant will make this choice specified into the tax system. The UAE ports and customs department will verify the taxable supplies at the time of exit to confirm the refund applicability,” Chaturvedi said.

Meanwhile, the FTA said that the retailers who meet the requirements set by the FTA are free to register in the system if they choose to. And if a tourist decides to make a purchase with the intention of applying for a refund of the tax from a supplier registered for tax refund system, then the supplier must provide them with the necessary documents to do so, most notably a tax invoice that meets all legal requirements. The tourist then submits the claim with the system operator directly and obtains the refund from the operator where sufficient evidential documentation has been provided.

Conditions for tax refund

  • Goods in question need to have been supplied to the tourist within UAE
  • Tourist must have the explicit intention to leave UAE in 90 days from the date of supply, along with the purchased supplies
  • Goods in question must be exported out of the UAE by the tourist within three months from the date of supply
  • Tourist needs to have purchased goods from a retailer registered in the system
  • Purchase process must be carried out – and the goods exported – according to the requirements determined by a decision of the FTA
  • Goods in question must not be exempted from refund

 

Source : https://www.khaleejtimes.com/business/vat-in-uae/how-tourists-can-get-/vat-refund-in-uae

7 WAYS TO AVOID VAT PENALTIES IN UAE

How to AVOID VAT PENALTIES IN UAE

The United Arab Emirates and the Kingdom of Saudi Arabia began the implementation of Value Added Tax (VAT) on January 1, 2018 at the rate of five per cent, while other GCC countries are expected to follow in the near future.

As VAT is new to the region, it is imperative for business owners to be aware and comply with the new regulations in order to avoid stiff penalties which could be as high as AED 50,000.

Seven tips for UAE businesses to Avoid Vat Penelties IN UAE as financial penalties that may be imposed due to violations, errors or incorrect record-keeping include:

1.  Register for VAT

Every company offering taxable goods or services with an annual revenue of AED 367,000 and above is required to register for VAT. However, those with an annual revenue between AED 200,000 and AED 367,000 will have the option to register. The Federal Tax Authority (FTA) has stated businesses must register within the prescribed period, and failure to do so could result in non-compliance penalties as severe as AED 20,000. In addition, unregistered companies will be required to stop sales until they receive their tax registration certificate (TRC).

2. Record all transactions

The law requires businesses that meet the minimum annual turnover (as evidenced through financial records) to register and keep a record of all their business income, costs and other associated VAT charges, whilst ensuring all records are up to date. These records will be submitted to the FTA in Arabic.

However, it is advisable for businesses that do not meet the minimum annual turnover to maintain records of all transactions. Supposing the FTA arrange an inspection to determine whether or not your company should be registered for VAT, these records are the only means of evidence to make decision. Otherwise, this may be seen as noncompliance, which would lead to penalties.

3. Collect VAT

Every business essentially plays the role of a tax agent, collecting on behalf of the government VAT on goods and services purchased by their consumers. Failure to collect this VAT may result in up to five times the amount of VAT being imposed on your company that would have been payable for the period in question. While there are still some uncertainties regarding the items subject to the tax, it’s recommended to follow best practices to maintain tax compliance.

4. File VAT return

VAT returns must be filed monthly if your company has an annual turnover above AED 150 million. Businesses with revenue below that level must file quarterly. This can be done electronically through the FTA website. Failure to file a tax return within the specified timeframe will make the business liable for fines.

5. Understand zero rates and exempt suppliers

The FTA has exempted some businesses in priority sectors from tax. Being a zero-rated supplier means that the goods being supplied are still VAT taxable, but at the rate of zero per cent. Therefore, your company is still required to record and report on all supplies. Such industries include real estate developers, jewellery, airlines, schools, clinics and hospitals.

6. Reverse charges

Reverse charges are the amount of VAT one would have paid on goods or services if they were purchased in the UAE. These charges apply when goods and services are imported from outside the GCC. As the business is not required to pay VAT at the point of import. the responsibility for reporting the VAT transaction shifts from seller to buyer (under the Reverse Charge Mechanism). In this case, the buyer reports their Input VAT (on the goods purchased) as well as their normal output VAT (on sales) in their return for that quarter.

7. Get the basics right

A tax invoice must be issued within 14 days of the date of supply. It is mandatory for a tax invoice to include the name, address and tax registration (TRN) of the registrant making the supply. An invoice must have a unique number and date of issue which enables identification of the tax invoice and the order of the invoice in any sequence. Also, it is mandatory for it to clearly state the unit price, the quantity or volume supplied, the rate of tax and the amount payable expressed in UAE dirham should be specified.

We know from experience in other mature VAT jurisdictions that businesses often struggle to address questions raised during audit by tax authorities. This is mostly due to the inability to produce complete documentation that substantiates liabilities and entitlements reported within the VAT return. Due to the transactional nature of VAT, it would be prudent for businesses implementing the tax to put in place a combination of automated processes and tools that can efficiently produce an audit file, upon the request of tax authorities.

 

Source: www.albawaba.com/business/7-ways-avoid-vat-penalties-uae-1148550