The United Arab Emirates is one of the world’s most sought-after business destinations and for a long now the protocols and regulations surrounding Business Taxation have been among the most lucrative for International Businesses. In the UAE, the Federal TAX Authority (FTA) is the authority that supervises and manages Tax Compliances of Business Entities – also referred to as ‘Taxable Persons’.
By law, all manners of Taxable Persons are required to comply with VAT guidelines for all kinds of business transactions in the UAE. However, it might so happen in the course of filing the VAT returns that the ‘input tax’ is greater than the ‘output tax’ on the return and that’s when a Taxable Person is eligible to file for a VAT Refund. Put simply, VAT Refunds are a way of recovering the extra tax paid by the taxable persons from the government.
VAT in the UAE
Broadly speaking, Value Added Tax or VAT is an Indirect Tax that governments across the world levy on the consumption of a majority of goods and services supplied. Currently, over 180 countries use VAT and, in all cases, the final cost is borne by the consumer.
In 2016, The UAE established by decree, (Decree No. 13 issued by His Highness Sheikh Khalifa bin Zayed Al Nahyan) – The Federal Tax Authority (FTA) as a Government Body responsible for the Management, Collection, and Implementation of Federal Taxes. In addition to helping the UAE achieve the best financial practices, the FTA’s prime objective was also to ensure an increase in non-oil revenues for the UAE – thereby reducing the region’s oil dependency, in alignment with the stated commitment of moving towards more sustainable forms of economy.
For a Taxable Person in the UAE, it is mandatory to file returns at the end of each Tax Period – a Three-Calendar Month period, the end of which is defined by the FTA. Further, it is necessary for each Taxable Person to file the return no later than the 28th day of the end of the Tax Period.
What is the purpose of the VAT Refund?
Every business entity in the UAE is supposed to submit a VAT return that calculates VAT due to the FTA. A business owner is eligible to request a VAT refund only in cases where the Input Tax stands more than the Output Tax on the return. An owner can also file for a refund even at a later stage when there is a credit amount owed against them.
Typically, the FTA requires 20 days to review a submitted application, post which it notifies the applicant if the application has been accepted or rejected. Only in very exceptional cases does the FTA require more than 20 days for reviewing a Refund Claim.
What is the procedure for a Taxable Person to file for a Refund?
Even though VAT Refunds can be filed by a business owner or any taxable person, it is very important to follow the right procedures while doing so. Errors in filing Tax Returns are liable to merit heavy penalties and fines by the FTA at later stages. Thus, it is often prudent to consult an Auditing Firm or Tax Consultant while filing.
The following is the basic procedure to be followed:
1. A Taxable Person or Business Owner must register their business on the FTA Website, by correctly entering all the details.
2. Once registered, the next step requires the Taxable Person to log in to the FTA e-services portal.
3. Step 3 involves navigating to the VAT tab and then on to the VAT Refunds tab, which grants the Taxable Person access to the Refund Form.
4. Filing the Refund Claim Form is extremely important as all of the Data filled must be exact and correct. The Business Owner might notice that some fields within the Claim Form are pre-filled, but the ones that aren’t, need to be filled very meticulously as discrepancies can result in heavy losses and even bankruptcy.
5. Once filled, the Form can be submitted by clicking the ‘Submit’ button and the status of the application is communicated to the applicant through email. It typically takes around 5 working days for the amount to get refunded once a claim has been verified and approved by the FTA.
6. Once an applicant receives a confirmation email from the FTA, he/she can check the balance under the ‘My Payment” tab, which displays all transactions to date.
VAT Filings and Refund Filings are extremely vital for any Taxable Person or Business Entity and we @ Standard Auditors can help you with the same. For more information and guidance, send us an Email at info@standardaccountants.com or call us at + 971 43795200
