Minimum age, spend set for VAT refund

dubai — The UAE’s Federal Tax Authority has set a minimum spending limit of Dh250 to be eligible for tourist VAT refund, which will come into effect in November.

Tourists will receive 85 per cent of the total VAT amount paid, minus an administration fee of Dh4.80 per tax free form, said Anurag Chaturvedi, managing partner, Chartered House.

In addition, a minimum age of 18 has been set to seek VAT refund for tourists and they will have to claim it within 90 days of their purchases. Goods and services consumed in the UAE will not be refunded.

According to Tourist Refund Scheme operator Planet, VAT refund will be offered at Dubai, Abu Dhabi and Sharjah airports until December 16. Following that, nine more locations will be added across the UAE.

However, tourists could be asked to present their goods to confirm they are unused.

dubai — The UAE looks set to put an up-to-date system in place for VAT refund to millions of tourists from November. The VAT refund system will be initially available at Abu Dhabi, Dubai and Sharjah airports and by year-end, it will be extended to 12 exit points, including the land borders and ports, it is learnt.

Federal Tax Authority (FTA) and Tourist Refund Scheme operator Planet have issued guidelines setting a minimum limit of Dh250 to claim VAT refund.

Planet said all non-UAE residents above 18 years old will be eligible for tax-free shopping. According to its website, tourists will be able to validate their tax-free forms at Dubai International, Abu Dhabi and Sharjah airports until December 16 whereafter the system will be in place at nine more locations — Al Maktoum airport, Abu Dhabi Port Zayed, Al Ain Airport, Al Ain land border, Fujairah Airport, Ras Al Khaimah Airport, Al Ghuwaifat land border, Hatta land border and Dubai Mina Rashid Harbour.

The operator further said tourists could be asked to present

VAT refund will have a very positive impact for both the industry and tourists

Joy Alukkas, Chairman and MD, Joyalukkas Group

Once validated, the tourist will choose a refund method — cash or credit card

Anurag Chaturvedi, Managing partner, Chartered House

their goods to confirm they are unused. It said only the owner of the passport under which the tax-free forms are registered will be entitled to collect the refund.

Anurag Chaturvedi, managing partner, Chartered House, said tourists will receive 85 per cent of the total VAT amount after the deduction of an administration fee of Dh4.80 per tax-free form.

Citing an example, he said if a tourist buys electronic goods worth Dh210 from a store and spends another Dh315 on buying souvenirs from another store, he can claim a tax refund of Dh15 on purchases worth of Dh315 and not against electronics purchase of Dh210 as it’s below the minimum spend limit set by the authority. “If the tourist spends Dh315 in the UAE, he/she will get refund of Dh7.95,” he said.

Thais Cunha, associate, Aurifer Middle East Tax, said tourists will be able to receive VAT refund for their purchases made from registered retailers. “The retailer will charge VAT and also ensure that the customer has all the appropriate documentation to reclaim it,” Cunha said.

According to Planet, the tourists’ tax-free tag needs to be validated within 90 days of the purchase. If receipts are not validated within 90 days, the tax-free tag expires and VAT cannot be claimed.

An invitation sent out last week to retailers and tax consultancies across the UAE by the FTA and the Dubai Chamber of Commerce and Industry to brief them about how to register for the tourist refund scheme revealed that the scheme would be rolled out in November 2018.

“The tourist can take goods and tagged receipt to the airport, seaport or border crossing. He will be required to visit Planet’s validation point [through self-service kiosks] to validate the invoice. Once validated, the tourist will choose a refund method — cash or credit card,” Chaturvedi said.

Joy Alukkas, chairman and managing director, Joyalukkas Group, welcomed the step, saying that Dubai is known as the City of Gold and this means the best quality and designs at the best possible prices.

“The VAT refund will help Dubai maintain its position among tourists since one of the biggest shopping attractions for them in Dubai is gold and jewellery. We welcome this strategic step and are sure it will have a very positive impact for both the industry and tourists visiting the UAE,” Alukkas added.

Deepak Babani, executive vicechairman of Eros Group, welcomed this initiative by the FTA, saying it’s a very a simple and friendly procedure for tourists. “It is a very positive step and procedures are simple. We were wondering about deduction for tourists’ refund, but we’re happy that it’s just 15 per cent. It should definitely improve sales locally,” Babani said.

Abdul Salam, group executive director, Malabar Group, said the implementation of VAT refund will bring in a fresh wave of energy to the tourism industry in the UAE.

“From the perspective of the gold and diamond jewellery retail industry, this action will help to attract tourists who would have been deterred by VAT implementation and will help Dubai maintain and grow its position as a preferred global jewellery destination,” Salam added.

Anil Dhanak, managing director, Kanz Jewels, said tourists’ VAT refund will put Dubai’s grip on the title ‘City of Gold’ in place.

“The five per cent increase on the finished gold products had dampened demand for jewellery but we expect the tourists who come to buy gold in Dubai will find a significant price difference between their home country and here as it had been previously,” Dhanak added.

According to a Dubai Chamber study, tourist spending in the UAE is projected to increase from Dh154 billion in 2017 to Dh205.5 billion by 2022. In Dubai alone, a study by Mastercard had estimated visitor spending at Dh104.6 billion last year, a growth of 10 per cent. According to the annual Mastercard Destination Cities Index, Dubai outpaced all other cities in visitors’ spending in 2016.

The UAE, along with Saudi Arabia, levied five per cent VAT on a host of goods and services from January 1, 2018.