VAT refund for tourists visiting the UAE

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Gulf Business Expert VAT-refund VAT refund for tourists visiting the UAE EconomyIn the near future, the UAE government plans to realize the possibility of VAT refund for people visiting the UAE as tourists

The introduction of VAT in January 2018 in the UAE also effected the tourists. This is especially true for those who come to the UAE mainly for shopping. At the same time, guests of the country are also required to pay tourist fees – which, however, the government decided to reduce from 10% to 7%.

And although the prospects of the tourism industry of the country are undoubtedly great, the authorities are trying to attract even more tourists. The authorities in cooperation with the Cabinet of Ministers decided to develop a system that will allow foreign guests to make a tax refund of the previously paid VAT.

Tourism is a very important industry for the economy of the United Arab Emirates, so the government is aware of the need to implement a VAT refund mechanism as soon as possible. But at the same time this step should be made professionally, applying the experience of other countries in this issue.

According to the authorities’ plans, the new system will start operating in the fourth quarter of 2018. Tourists will be able to refund taxes from purchases made in retail stores participating in the program. This step is made to increase the flow of tourists to the country.

The authorities explained that the management process will be under the direction of an international company, but it is not clear yet to which company the government will apply. The two largest companies specializing in tax deductions, Global Blue and Travelex, declined to comment. The Federal Tax Authority of the UAE declared that the company will be selected in the near future.

It should be noted, that tourists arriving from the countries of the Cooperation Council of the Arab States of the Persian Gulf will not be able to use return of VAT on the system being developed. This is the privilege which will apply only to the rest of the guests.

According to the executive order, the following conditions must be met for the implementation of the VAT refund scheme:

The buyer must receive the purchased goods during his stay in the country. The purchase must be made within 90 days of the tourist’s stay in the UAE. A tourist can not be a citizen of the country of the Council of Cooperation of the Arab States of the Persian Gulf.

The Federal Tax Authority has not published yet a list of goods for which it will be possible to make a refund, but officials have warned that not all goods that are subject to VAT will be in the list.

In 2017, revenues from the tourism industry (a total of 154.1 billion dirhams) accounted for 11.3% of the GDP of the Arab Emirates. The best prospects for the tourism industry are Dubai, thanks to its developed infrastructure, retail trade, regular events, a host of hotels and other factors. It is expected that the possibility of VAT refund will make the country an even more attractive tourist destination, especially for shoppers.