The UAE’s Federal Tax Authority has appointed Planet as its exclusive tax refund operator for the Tourist Refund Scheme which will be rolled out in November 2018.
“The FTA has announced that from November 2018, eligible tourists will be able to receive a proportion of the VAT as a refund when they shop at registered stores,” said an invitation sent 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.
“We wish to invite you to an event organised by the FTA and their exclusive tax refund operator, Planet, who will be operating the Tourist Refund Scheme ,” said the invite.
Planet is an international company, but for the UAE operations and executing the Tourist Refund Scheme in the UAE, a Special Purpose Vehicle (SPV) has been set up, and the project will be executed by Planet along with local partners.
The FTA had earlier announced that the VAT refund scheme will be implemented from the fourth quarter of 2018.
The invite revealed that all eligible retailers will be able to register for the Tax Refund Scheme from September 10. The first briefing for retailers will be held in Abu Dhabi on September 11 and the next day in Dubai.
The FTA had said that outlets and points of sales across the country will be connected for the tourist refund scheme.
Revealing conditions and procedures for tourist VAT refunds, the FTA had said that tourists need to have purchased goods from retailers registered in the system.
Designated spaces will be provided where tourists can easily reclaim taxes through an electronic system, without any human involvement. The digital system determines the taxes that are eligible for a refund and then reimburses tourists.
Article 53 of Executive Regulations defines Entertainment Services as follows:
Entertainment services are defined under Article 53(2) of the Executive Regulations as “hospitality of any kind” including the provision of:
food and drinks which are not provided in a normal course of a meeting; and
access to shows or events, or trips provided for the purposes of pleasure or entertainment.
1 ENTERTAINMENT PROVIDED TO EMPLOYEES:
General Rule:Input Tax on Entertainment expenses incurred by the taxable person for employees shall be non-recoverable.
Exceptions:The onlycircumstances in which a taxable person in entitled to recover VAT on such costs are:
1. where it is a legal obligation to provide those services or goods to those employees under any applicable labour law in the UAE or Designated Zone in which the entity is;
2. it is a contractual obligation or documented policy to provide those services or goods to those employees in order that they may perform their role and it can be proven to be normal business practice in the course of employing those people; or
3. where the provision of goods or services is a deemed supply under the provisions of the Decree-Law.
For example, where a new employee joins a business and is provided with hotel accommodation for a short initial period prior to finding their own accommodation, this would not be considered entertainment and the VAT incurred on such costs would be recoverable, as this cost is necessary for the person to perform their role.
However, where a business organizes a lunch or dinner for employees e.g. a Ramadan Iftar, this
would be considered to be entertainment and the VAT incurred on such costs would be blocked from
Expenses incurred by employees for food & accommodation in the business trip shall not be treated as Entertainment Expenses.
Simple Hospitality provided in the normal course of a business meeting e.g. where simple food & refreshments are provided during the course of a meeting, the cost is considered to be recoverable. However, where the food & refreshments are considered to be so substantial that they would constitute an end in themselves and may have encouraged someone to attend the meeting, the input tax incurred is non-recoverable. For example, a gala dinner event with a short introduction by a speaker would not be considered to be food and beverage in the normal course of a business meeting and the input tax incurred on such costs shall be blocked from the recovery, where no charge is made for the attendance.
Sundry office incidental expenses for general use by both employees and visitors such as tea & coffee available in the office, flowers for display in reception, dates,chocolates or equivalent snack available in the office shall not be treated as Entertainment Services.
Where events are held purely for the purposes of entertaining staff, for example staff parties, the VAT incurred shall be blocked from recovery unless a charge is made to the employee for attending.
Purchase of goods/services to be given away to staff free of charge in order to reward them for long service or for any other purpose shall be treated as Entertainment Services.
2 ENTERTAINMENT PROVIDED TO NON-EMPLOYEES:
Input Tax shall be non-recoverable if it is incurred by a person in respect of entertainment services provided to anyone not employed by the person including Customers, Potential Customers, Officials, Investors etc.
All the registered business are required to file a VAT return furnishing the details of sales, purchases output VAT and input VAT paid during the tax period. Here, the output VAT is the amount which is collected on sales and Input VAT is the amount which is paid to the supplier towards purchases / expenses. The eligible input VAT amount will be allowed to be adjusted with the output VAT amount. After adjusting the output VAT and Input VAT, the result will lead to one of the following situations.
VAT Payable: If output VAT amount is higher than the Input VAT, the balance will be VAT payable which needs to be paid to FTA.
VAT Refundable: If output VAT is lesser than the input VAT amount, the excess balance will be VAT refundable.
How to Treat VAT Refundable as per UAE VAT?
The taxpayer has following two options in treating the excess input VAT commonly known as VAT refundable:
1. The taxpayer will be eligible to request for a VAT refund
2. If he does not wish to request for a refund of the excess input VAT, the excess recoverable tax will be carried forward to subsequent tax periods and can be used to offset against the payable tax and / or penalties, or he can apply for a refund later at any point in time
How to Claim VAT Refund?
If you have excess input VAT, an option will be available on the VAT Return to request a refund.
As shown in the image above, you need to select ‘Yes’ in box no. 15 ‘Do you wish to request a refund for the above amount of excess recoverable tax’. If you select ‘No’, your excess recoverable tax will be carried forward to subsequent Tax Periods and can be used to offset against payable tax and / or penalties.
After the VAT Return is submitted, you are required to complete the VAT refund application ‘Form VAT311’. The following are the steps to submit VAT refund form ‘VAT311’:
1.Login to FTA e-Services Portal using your username and password
2.In order to access the refund form, navigate to the ‘VAT’ tab and then to the ‘VAT Refunds’ tab
3.Click ‘VAT Refund Request’ as shown in the image below:
4.On clicking ‘VAT Refund Request’, the refund form will open. Fill the details in all the applicable fields. Mandatory fields are mandatorily to be completed in order to submit the Refund Form. Most of the details are auto-populated. The following are the fields available in the VAT refund form 311:
a.TRN, Legal name of entity (English) etc.: This section is auto-populated on the basis of the information contained in your account user profile. It is therefore very important that the information contained in your profile is both correct and accurate. Please check it before completing the refund form
b.Total amount of Excess Refundable Tax (AED) : This field is auto-populated based on the excess refundable tax reported in the last VAT returns less administration penalties due (except for the late registration penalty which is shown separately)
c.The amount you wish to have refunded (AED): Please enter the amount you wish to have refunded here. This amount must be equal to or less than the ‘Total amount of Excess Refundable Tax’
d.Remaining amount of eligible Excess Refundable Tax: This field is auto-populated and represents the remaining amount of excess refundable tax which you may apply for a refund in the future.
e. Late registration penalty amount (in AED) : This field is auto-populated depending on whether you have a penalty imposed and have settled the late registration penalty for VAT or not. The following table gives the details when the amount will be shown in this field:
IF you have not been charged a penalty
If you have been charged a penalty and you have paid the penalty
If you have been charged penalty but are yet to be paid the penalty at the time of claiming this refund
f.Authorized Signatory and Declaration: Authorized signatory will be auto-populated and you need to tick the declaration before submitting
5.Once you complete the form, click on the ‘Submit’ button as shown below:
The refund form will be processed within 20 business days of submission. You will receive an email notification from the FTA on the result of your application. Once your claim is approved, the amount will be refunded within 5 business days. You will receive a confirmation email of the refund and you may check your balance in ‘My Payment’ tab -> Transaction History section displaying the amount refunded.