VAT and Excise Tax Refund in UAE: Everything You Need to Know

Excise Tax is an indirect tax imposed on the import and manufacturing of excise goods that are to be consumed within the UAE. Excise goods are products that are harmful to human health and the environment. Similarly, VAT is imposed on a wide variety of goods that affects not only the residents but also the tourists.

VAT and Excise are both relatively new tax systems by the UAE government. One of the reasons behind the tax is to broaden the government resources to reduce their dependence on oil and hydrocarbons. Similarly, the federal excise tax is imposed to discourage the consumption of harmful products from establishing a healthy environment.

Refunds of VAT and Excise in UAE

Basically, a tax refund is the money paid back to the taxpayer when the amount paid is more than the tax needed to be paid. It is an excess amount that the government is returning to the tourist. Here are the following conditions of VAT and Excise refund in the UAE.

VAT Refunds

The rate of Value Added Tax (VAT) in the UAE is kept at 5%. FTA has finalized the tax refunds on tourists that they can expect to claim tax that was added to what they have purchased while in the country. VAT refund is available under the following cases:

Businesses

  • If the input tax on purchased goods is more than the output tax collected by the business.

Tourists

  • FTA has recently introduced the VAT refund scheme for the tourists. A tourist who visits UAE can file for a refund of the VAT paid during the trip.

Following are the conditions that should be met by the tourists to qualify for the refund:

  • The tourists should not be from the country included in the GCC (Saudi Arabia, Kuwait, UAE, Qatar, Bahrain, and Oman).
  • Tourists should have the intention to leave the country within 90 days of purchase.
  • Tourists should have the goods as they are in the country at the time of purchase.
  • Tourists must export the purchased goods out of the UAE within three months from the date of supply.
  • Purchased goods should not be excluded from the Refund Scheme of the FTA.

How to Apply for VAT Refund?

After businesses adjust for VAT, the results lead to one of the following:

  • VAT Payable: If output VAT amount is higher than Input VAT, the balance will be VAT payable needed to be paid to FTA.
  • VAT Refundable: If output VAT is lesser than the input VAT amount, excess balance will be VAT refundable.

You can request a VAT refund online from the FTA website, or you can get advice from the best VAT consultancy in Dubai to file for the VAT refund. Tourists can also consult these VAT experts regarding VAT refunds for their shopping.

Excise Tax Refunds

Excise tax is paid only once during the supply chain, therefor not every business dealing with excisable goods can obtain a refund. Unlike VAT, there are specific cases in which a refund of excise tax in UAE is possible. The following are the major conditions where excise tax refund may be applicable.

Refund for Registered Taxpayers

  • When the final Excise good has already paid excise tax on any of the raw materials needed for ingredients (e.g. excise tax on raw tobacco and cigarettes).
  • When the final excise product is exported outside the UAE and is not consumed locally, and excise tax has already been paid.
  • In case the additional amount is paid to FTA by mistake. In such instances, adjustments will be made in the next excise tax payment.

Refunds for Unregistered Taxpayers

  • In case there is a certain agreement between UAE and other country exists to supersede, the excise tax agreement in the UAE or a fixed tax has already been paid.
  • In case the taxpayer is registered in another GCC country and has already paid excise tax in UAE when exporting the goods out of UAE.

How to Apply for Excise Tax Refund?

There are two types of excise taxes on goods in UAE:

  • Specific Excise Tax: It is charged by quantity regardless of the price of the goods, i.e., per unit, kilogram, etc.
  • Ad valorem Excise Tax: It is charged as a percentage of the value of the good.

All taxable entities can register for an Excise tax refund through FTA’s online portal. Simply log in to the portal and submit the online Excise Tax Refund Form. You can also get in touch with Tax consultants in UAE regarding excise tax refund and amount of the tax.

Beware of the Penalties for Violation of the FTA Laws!

Both Excise Tax and VAT have been introduced in UAE at the same time between 2017-2018. Both the taxes are applied on different products at different rates. Therefore, it is advised to consult a tax professional before filing for a refund of the tax, especially for tourists to avoid penalties.

More recommended:

Which areas does every VAT Consultancy cover?

Things to consider before choosing an audit firm

The VAT on real estate supply in the UAE

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