How to Claim a VAT Refund in the UAE?

All the registered business are required to file a VAT return furnishing the details of sales, purchases output VAT and input VAT paid during the tax period. Here, the output VAT is the amount which is collected on sales and Input VAT is the amount which is paid to the supplier towards purchases/expenses. The eligible input VAT amount will be allowed to be adjusted with the output VAT amount. After adjusting the output VAT and Input VAT, the result will lead to one of the following situations.

  • VAT Payable: If output VAT amount is higher than the Input VAT, the balance will be VAT payable which needs to be paid to FTA.
  • VAT Refundable: If output VAT is lesser than the input VAT amount, the excess balance will be VAT refundable.

If you have excess input VAT, an option will be available on the VAT Return to request a refund. The following are the steps to submit VAT refund form ‘VAT311’:

1. Login to FTA e-Services Portal using your username and password

2. To access the refund form, navigate to the ‘VAT’ tab and then to the ‘VAT Refunds’ tab

3. Click ‘VAT Refund Request’

4. On clicking ‘VAT Refund Request’, the refund form will open. Fill the details in all the applicable fields. Mandatory fields are mandatorily to be completed to submit the Refund Form. Most of the details are auto populated. The following are the fields available in the VAT refund form 311:

  • TRN, Legal name of entity (English) etc.: This section is auto populated based on the information contained in your account user profile. It is therefore very important that the information contained in your profile is both correct and accurate. Please check it before completing the refund form
  • Total amount of Excess Refundable Tax (AED): This field is auto populated based on the excess refundable tax reported in the last VAT returns less administration penalties due (except for the late registration penalty which is shown separately)
  • The amount you wish to have refunded (AED): Please enter the amount you wish to have refunded here. This amount must be equal to or less than the ‘Total amount of Excess Refundable Tax’
  • Remaining amount of eligible Excess Refundable Tax: This field is auto populated and represents the remaining amount of excess refundable tax which you may apply for a refund in the future.
  • Late registration penalty amount (in AED) : This field is auto-populated depending on whether you have a penalty imposed and have settled the late registration penalty for VAT or not.

5. Authorized Signatory and Declaration: Authorized signatory will be auto populated, and you need to tick the declaration before submitting

6. Once you complete the form, click on the ‘Submit’ button.

The refund form will be processed as per the FTA process. You will receive an email notification from the FTA on the result of your application. Once your claim is approved, the amount will be refunded. You will receive a confirmation email of the refund and you may check your balance in ‘My Payment’ tab -> Transaction History section displaying the amount refunded.

If you are interested in gaining a Certified Diploma in VAT for the Middle East region, then Kaplan Professional Middle East is here to help you achieve it with the support of the industry’s leading taxation trainers.

Types of Value Added Tax (VAT)

Value-added tax (VAT) refers to a type of indirect tax that is imposed on the supply of most goods and services. The VAT is charged and collected at each stage of the supply chain. It is generally the final consumers who bear the VAT cost while businesses collect and account for the tax.

In the UAE, there are primarily two VAT rates applicable: The standard rate of 5% and the zero rate of 0%. Although VAT is not accounted for in respect of both zero-rated and VAT exempt supplies, there is an important distinction between the two.

What is a Taxable Supply?

Most business transactions are based on the supply of goods or services. To be taxable, some conditions would generally need to be met. Hence, the supply:

  • should be a good or service
  • needs to be done for a consideration

VAT may be charged at either the 5% standard rate or the 0% rate for taxable supplies. As mentioned earlier, some supplies are exempted from VAT and hence, are not considered as taxable supplies.

Types of VAT

Depending on the nature of supplies, UAE VAT can be classified into three major categories:

1. Standard Rated VAT

A VAT rate of 5% is applicable to the supply & import of most of the goods & services in the UAE. The country’s law states that when a business is registered for VAT and VAT is charged at the standard rate, the company may be entitled to recover the VAT charged by its supplier (terms and conditions may apply).

2. Zero Rated VAT

The VAT is not accounted for on zero-rated supplies (since the applicable rate is 0%), but such supplies are still treated as “taxable supplies” in all other respects. As a result, the person making the supply has the right to recover the VAT incurred on their own business expenditure in the same way as they would if they made standard-rated supplies. According to Article (45) of. The Federal Decree no. 8 of 2017 on VAT, the zero rate shall apply to the supply of the following goods & services:

  • A direct or indirect export of goods & services to outside the Implementing States.
  • International transport of passengers and Goods which starts or ends in the State or passes through its territory, including Transport-related Services.
  • Supply of air, sea, and land means of transport for the transportation of passengers and Goods.
  • Supply of Goods and Services related to the supply of the means of transport mentioned above and which are designed for the operation, repair, maintenance, or conversion of these means of transport.
  • The first supply of residential buildings within (3) years of its completion.
  • Supply of aircrafts or vessels designated for rescue and assistance by air or sea.
  • The supply or import of investment precious metals.
  • The supply of preventive and basic healthcare Services and related Goods and Services.
  • The supply of educational services and related Goods and Services for nurseries, preschool, school education, and higher educational institutions owned or funded by Federal or local Government.
  • The first supply of buildings specifically designed to be used by Charities.
  • The first supply of buildings converted from non-residential to residential.

3. VAT-exempted supplies

Products and services in this category are not subject to VAT. It means they do not incur VAT charges at the time of purchase or sale. In addition, businesses which are in the business of making mixed supplies with varying VAT liability will have to apportion VAT incurred on general costs.

According to Article (46) of. The Federal Decree no. 8 of 2017 on VAT, the following supplies are exempt from VAT:

  • Financial services which are not conducted for an explicit fee, discount, commission, rebate, or similar type of consideration, such as life insurance and reinsurance of life insurance.
  • Residential buildings, other than the residential buildings which are specifically zero-rated.
  • Bare Land.
  • The local passenger transport.

If you are interested in attaining a Certified Diploma in VAT for the Middle East region, then Kaplan Professional Middle East is here to help you achieve it with the support of the industry’s leading taxation trainers.

Information Source: Creative Zone Tax & Accounting

Who is a Tax Agent?

Tax agents in the UAE play an extremely important role in assisting with the operation of the country’s tax system. The concept of a tax agent is to help businesses to be compliant in respect of their tax obligations:

  • A person is allowed to appoint another person(s) as their tax agent(s) to act in their name and on their behalf regarding their tax affairs with the Federal Tax Authority (FTA).
  • A tax agent assists the person in the fulfillment of their tax obligations and the exercise of their associated tax rights.

Tax agents are usually engaged by their clients through the tax agency with which they are associated in order to provide tax-related services which include, but are not limited to:

  • Helping the businesses register with the UAE Federal Tax Authority
  • Preparing and submitting tax returns to the UAE Federal Tax Authority on behalf of the businesses
  • Maintaining tax-related records and/or information
  • Enquiring about tax-related matters with the UAE Federal Tax Authority
  • Submitting requests for reconsideration of decisions issued by the UAE Federal Tax Authority

If you are interested in attaining a Certified Diploma in VAT for the Middle East region, then Kaplan Professional Middle East is here to help you achieve it with the support of the industry’s leading taxation trainers.

Information Source: UAE Federal Tax Authority