CD 41/2018 — Introducing the VAT refunds for tourists scheme

Factual summary

Introduces the Tax Refunds for Tourists Scheme under which an Overseas Tourist can recover VAT on Goods bought from a participating Retailer and exported, provided the conditions of Article 68(2) of the VAT Executive Regulation are met. The tourist claims the refund from the Operator, who may deduct administration fees and then recovers the refunded VAT from the Retailer; the Retailer in turn reduces its Output Tax for the Tax Period in which the tourist was refunded. Start dates, purchase and export requirements and the minimum claim value are left to decisions of the FTA Chairman.

What it means in practice Professional insight

Who: retailers that sell to tourists and want to offer tax-free shopping. What to check: participation in the Scheme, refund documents and tax invoices issued to tourists, and that Operator reimbursements are deducted from Output Tax in the right Tax Period.

Key provisions

• Art. 1 An Overseas Tourist is any natural Person who is not resident in the UAE or any other Implementing State, is not a crew member on a flight or cruise, and is leaving the UAE to outside the Implementing States; Retailers are businesses registered for Tax in the State that supply Goods; the Operator is the provider contracted to provide and operate the Scheme in the State; a Tax Free Purchase is a purchase by an Overseas Tourist intended to be subject to a Tax refund under the Scheme.
• Art. 2 The Chairman issues a decision setting the date the Scheme comes into effect, which shall be no later than 1 January 2019.
• Art. 3(1) To be eligible for a refund, the conditions of Clause 2 of Art. 68 of Cabinet Decision No. 52 of 2017 must be met, the Goods must be bought from a Retailer participating in the Scheme, the purchase and the Export of the Goods must follow the requirements set by decisions of the Chairman, and the Goods must not be excluded from the Scheme by the Authority.
• Art. 3(2)–(4) Participation is optional for any Retailer meeting the participation requirements specified by the Authority; a participating Retailer gives an Overseas Tourist who asks for a Tax Free Purchase the refund documentation determined by the Authority, including a tax invoice with the particulars of Art. 59 of Cabinet Decision No. 52 of 2017; the tourist claims the refund directly from the Operator, who refunds only on receipt of satisfactory and sufficient evidence as stipulated by the Authority.
• Art. 3(5)–(7) The Operator may charge the Overseas Tourist fees for administering the refund and deduct them from the amount refunded, in accordance with a decision of the Chairman, provided the fees do not exceed those approved by the Cabinet; the Operator and the Customs Departments cooperate on the validation and inspection of Goods under the conditions set by the Authority.
• Art. 3(8)–(9) Where the Operator has correctly refunded the Tax on a Tax Free Purchase, it may seek reimbursement of that amount directly from the Retailer that sold the Goods; a Retailer that has correctly reimbursed the Operator treats the amount as a reduction of Output Tax in the Tax Period in which the refund was paid to the Overseas Tourist.
• Arts. 3(10), 4, 7 The Authority may set procedural, evidential, verification, documentation and record-keeping requirements and enter into arrangements for operating the Scheme; the Chairman sets a minimum value for refund claims; the decision is implemented as of its date of issuance and published in the Official Gazette.