VAT refund scheme to spur tourist spending
minimum spend amount is set at Dh250 and tourists can claim refund within 90 days of their purchase. The FTA explained that tourists will receive refunds through a special device at the departure point, by submitting the tax invoices for their purchases from the outlets registered in the scheme, along with copies of their passport and credit card. Tourists can either recover the VAT in cash in UAE dirhams, or have it transferred to their credit card.
“Implementing the tax refund for tourists scheme helps attract larger numbers of tourists and allows them to enjoy the UAE’s unique tourism offering, especially in retail,” said Khalid Ali Al Bustani, director-general, FTA.
Anurag Chaturvedi, managing partner, Chartered House, had said if a tourist buys electronic goods worth Dh210 from a store and spend another Dh315 on buying souvenirs from another store, he can claim tax refund of Dh15 on purchases of Dh315 and not against electronics purchase of Dh210 as it’s below minimum spend limit set by the Authority.
He pointed out that tourist will receive 85 per cent of the total VAT amount paid, minus an administration fee of Dh4.80 per tax free form.
“In the example of purchase of Dh315, the tourist will get refund of Dh7.95,” he said.
The FTA said that each retailer fulfilling the requirements may register in the scheme. If tourists express their desire to these registered retailers to make purchases with tax refunds, the concerned retailers must submit the required documents to claim the tax refund through the Scheme as specified by the FTA, including tax invoices that meet all the legal requirements.
Tourists must then apply for a refund of the tax directly from the operator and provide sufficient and convincing evidence.
It is estimated that tourist spending in the UAE will increase from Dh154 billion in 2017 to Dh205.5 billion in 2022. The UAE levied 5 per cent VAT on a host of goods and services from January 1, 2018 as part of GCC framework.
Mayank Sawhney, managing director, MaxGrowth Consulting, said VAT refund scheme is similar to the scheme adopted by most of the European countries, wherein the Toursit can collect the VAT Refund from the departing Airport, Seaport or Land port, while leaving the country.
He noted that the scheme is relatively user-friendly for tourists, provided that they fulfil the required conditions. However, there may be some challenges to practically claim the benefit of this scheme for some of the tourists, such as long queues at VAT refund counters; tourists not carrying their passports or passport copies while going out for shopping as passport details would be uploaded in the FTA system in order to issue VAT refund tag; and identification of the eligible retail outlets which have registered under this scheme.
Sawhney agreed that the eligible retailers registered under this scheme will benefit more from increased buying by tourists from their outlets vis-a-vis retailers who are not registered under this scheme.
Thomas Vanhee, partner, Aurifer Middle East Tax, also believes that the system implemented by FTA is very much in line with what is applied internationally and is likely to be easier and more userfriendly than in some European countries.
“Especially the electronic link between the retailers and the operator of the system is relatively innovative and ensures the reclaim process will be easier for travellers. Tourists buying luxury goods or expensive electronics will be very much interested in the system. It will surely make the system more attractive,” Vanhee added.
Vanhee echoed Sawhney’s commenting, saying registered retailers will benefit from more tourists buying at their shops provided the shop is easily identifiable for participating in the scheme.
Nimish Goel, partner, WTS Dhruva Consultants, also agreed, saying the entire refund process would be undertaken electronically and seems quite simple and user-friendly.
He said the fact that tourists can recover VAT amount either in cash or have it transferred to their credit card is quite unique.
“The registered retailers will certainly benefit more in terms of tourist buying once the scheme is implemented. Once registered under thse scheme, these retail outlets will certainly market themselves as registered under the tourist refund scheme in order to attract more tourists and gain the competitive edge in the market,” Goel added.