I read that the UAE recently introduced VAT refunds for business visitors. My UK company is sending four employees to the UAE to participate in a series of conferences we are sponsoring. Our spend in the Emirates will include accommodation, subsistence and transportation for the team. It will also include the sponsorship for the conference organisers, which covers the costs of the physical booth and the marketing opportunities, physical marketing materials in Arabic that we will source in the UAE and entertaining potential customers during the events. How can we take advantage of the business VAT refund scheme and what would be eligible? MR, UK
Last month the Federal Tax Authority issued a detailed guide on VAT refunds for business users, which I encourage you to read on the FTA's website www.tax.gov.ae under the heading Getting Help / Guides and Forms / VAT. As with all taxes, the devil is in the detail, and it would be easy not to collect the required information to support your refund and have it disallowed on a technicality that could have been avoided.
The refund scheme works on an annual basis so currently you can only claim refunds on tax paid during the calendar year January 1 to December 31 2018. For any spend you make in calendar year 2019, you can apply for a VAT refund from March 1 2020. To avoid numerous small claims for refund, the FTA has set a minimum claim amount of Dh2,000 on each application, which may consist of single or multiple purchases. The process is part online via the FTA portal, and part in hard-copy format.
To qualify for a refund you must have no place of establishment or fixed establishment in the UAE, not be a taxable person or running a business in the Emirates or be running a registered business within a jurisdiction approved by the FTA for VAT refund.
The FTA's user guide lists in Appendix A the countries whose registered businesses are eligible for a refund. The scheme is only available to those businesses from a country that run a reciprocal scheme. There are 22 countries on the list mostly in Europe and the GCC.
As well as the online claim, you must submit original hard copy tax invoices and proof of payment. The proof of payment may be in the form of a credit card or bank statement, a receipt issued by the invoicing company or the original invoice stamped as paid where the suppliers’ details are on the “paid” stamp. This is really important and where most refunds could be denied through failing to supply the exact information requested. I envisage you will only have the opportunity to get the compliant tax invoices and receipts while you are in the UAE.
Once you’ve established you are eligible for a refund, consider what can be included in your claim as there are, of course, restrictions. If the input tax would not be recoverable by a UAE VAT registered business, then it is understandably excluded from this reclaim scheme.
You state you will be paying for accommodation, subsistence and transport costs for your employees. Provided the accommodation and subsistence could not be considered entertaining or excessive it can be reclaimed. Any overly expensive meals or shows, including anything involving alcohol would not qualify for a refund. FTA rules do not allow for input tax reclaim for any employee or customer entertaining. Meals at the conference or hotel venue for your own staff would probably be allowed. Any other restaurant should not be included in your claim. Also, entertaining customers or potential clients would be disallowed from the reclaim as it is specifically excluded by the FTA.
Public transport and taxis are VAT free in the UAE, but if you hired a vehicle for business use you should be eligible to reclaim the tax. Private use is excluded under the UAE Vat legislation.
The costs of your sponsorship and physical booth, as well as the purchase of marketing materials would certainly be eligible for a refund.
As well as the refund guide, read through the FTA's public clarification guides on non-recoverable input tax - entertainment and tax invoices. Both of these are on the website under Getting Help and are written in an easily digestible format. Both will be relevant to ensuring your refund claim is successful.
Lisa Martin, a chartered accountant with more than 20 years' commercial finance experience, is the founder of accounting, auditing and VAT consultancy, The Counting House. Email any VAT queries to firstname.lastname@example.org