All Taxable Persons (legal entities or natural persons) in the UAE must file VAT returns according to their tax period, describing their sales and purchases. It is necessary to accurately record both the input VAT paid and the output VAT collected during the tax period.
In this situation, input VAT refers to the sum the business paid to the supplier, while output VAT refers to the amount the firm received through its sales. Either of the following two outcomes will result from the adjustment of input VAT and output VAT:
- VAT payable: This happens when output VAT is more significant than input VAT
- VAT refundable: This happens when output VAT is less than input VAT
How is VAT refundable treated in the UAE?
Regarding how to handle the VAT refundable amount, the taxpayer has two alternatives. He has two options: he can request a refund of the money or carry the refundable amount forward to future tax periods to be deducted from subsequent tax payments.
Companies with strong cash flow go with option two because there is no immediate need for cash.
How can a VAT refund be claimed?
To start the process, answer “yes” to the question “Do you intend to obtain a refund for the above amount of excess recoverable tax?” on the portal. You must apply for a VAT refund (Form VAT 311). The steps for submitting form VAT311 are as follows:
- Login to the FTA e-services portal
- Locate the ‘VAT refund’ tab under the ‘VAT’ tab
Click on “VAT refund request” and complete the form that appears with all the necessary information. The information that must be provided on this form is as follows: TRN, legal name of the entity in English, the total amount of excess refundable tax, the amount you wish to have refunded, the amount of eligible excess refundable tax that is still unclaimed, the amount of the late registration penalty, and the name and signature of the authorised signatory are all required. Most of the fields mentioned above are automatically filled in, so double-check the information to prevent any form problems.
You will be notified via email of the outcome of your application once the FTA has evaluated it. If your claim is approved, the money will be reimbursed.
VAT refund for tourists
All visitors to the UAE are eligible to request VAT refunds on the goods they buy. At the same time, they are there, subject to specific terms and conditions, such as the visitor must have a specific intention to leave the country within 90 days of purchase; a claim must be submitted within 90 days of purchase; the minimum spend to qualify is Dhs. 250; the maximum limit for a cash refund is Dhs. 7000; and visitors will only receive 85% of the VAT refund.
Since introducing its tax system in January 2018, the UAE has made it a priority to lessen any needless burdens placed on people and enterprises through policies and procedures designed to lower the tax burden.