This blog is the step-by-step guide to claim VAT refund on Business Expenses in Dubai, UAE. Let’s delve straight into it. 

VAT Refunds on Business Expenses in the UAE 

Claiming VAT paid on business expenses is referred to as Input VAT recovery. It is essential to claim a VAT refund to minimize tax liability and improve cash flow. Businesses in Dubai, UAE registered with VAT can claim VAR refund on eligible expenses only. Later, in this blog we will discuss one by one all procedures for reclaiming VAT. 

Input VAT Recovery 

Input VAT recovery is the reclamation of VAT paid on eligible purchases by VAT-registered businesses in the UAE. This is to ensure that the end-consumer bears VAT cost and effective management of business’s cash flows. You might be curious about VAT registration requirements. Let’s see what the requirements are: 

1: Businesses with an annual revenue of over AED 375,000 must register for VAT 

2: Companies with a turnover between AED 187,500 and AED 375,000 may choose to register voluntarily to benefit from VAT recovery.  After registration, businesses in UAE are able to claim VAT refunds on purchases. Once registered, businesses can reclaim VAT on business purchases, reducing the net tax burden. 

When to Claim Input VAT Recovery 

Claims for input VAT can be made with the first VAT return if a valid tax invoice has been received or the invoice will be paid within six months of the payment date. 

Checklist 

• Eligibility Confirmation: Ensure all purchases are related to taxable activities (standard or zero-rated). 

• Documentation: Always have a tax invoice for each claimable purchase. 

• Payment Timing: Confirm that payments will be made within six months of the invoice date. 

• Non-Eligible Purchases: VAT-exempt items like public transport, bare land, or financial services, Recreational expenses (e.g., entertainment for clients or employees) and Personal expenses, including private vehicle costs and non-business-related prerequisite. 

What types of expenses qualify for input VAT recovery? 

Qualifying expenses must be directly related to taxable business activities. These include standard-rated (5%) and zero-rated supplies. Non-eligible expenses are VAT-exempt items, recreational expenses for employees, personal vehicle expenses, and other personal employee perks unrelated to business. 

Timeline for VAT Refund 

After the submission of claim for refund by the taxpayer, FTA process and review application within 20 days of submission. The taxpayer is notified regarding the decision of FTA whether the claim is accepted or rejected. FTA will notify the taxpayer regarding extension of the deadline if the process exceeds the usual timeline of 20 days. 

VAT Refund Form 

The form of VAT refund contains the following fields;

TRN (Tax Registration Number): This field is pre-occupied by the information in taxpayer’s account in the User Profile tax. Verification of TRN is advised.   

Total amount of Excess Refundable Tax (in AED): This field is occupied based on the formula i.e. Refunds-Penalties= Excess Refundable Tax. Refunds reported in all previously reported VAT returns and all administrative penalties due except for the late registration penalty are included. 

The amount you wish to have refunded (in AED):

The amount entered must be equal to or less than the amount displayed in the Total amount of Excess Refundable Tax field.  

Remaining amount of eligible Excess Refundable Tax:

This field is filled with the detail of amount of refundable tax that you can apply for in future. 

Late registration penalty amount (in AED):

This field is pre-occupied by the penalties imposed on taxpayer and whether the penalty amount has been settled or not. If a taxpayer is free from penalties, then the field displays Zero AED. If a taxpayer has been charged a penalty which was paid, then the field will display Zero AED.  If a taxpayer had been charged with a penalty and is yet to pay the amount at the time of VAT refund claim, then this field displays the amount of penalty. If refund amount is negative after the deduction of penalty amount, the application is automatically rejected after the submission. If the amount is positive after the deduction of penalty amount, the balance will be submitted to FTA for VAT refund claim purposes. 

Authorized Signatory and Declaration:

The authorized signatory is pre-occupied by the system in both English and Arabic. The taxpayer claiming the refund must read the declaration thoroughly before ticking Yes to submit the form.  Submitting a refund claim  For the submission of refund claim following steps must be followed;  

• Log in to the FTA’s e-Services portal.
• Go to the VAT tab, then the VAT Refunds tab, and access the form by clicking VAT refund request.
• Complete the form. Some of the fields are pre-populated using the details from taxpayer’s account. Make sure that the details entered are correct, then submit the form by clicking ’Submit’.  

After the submission of the form, taxpayers will receive an email from the FTA to notify them of the result of VAT refund application. After the approval of the claim, the refund is processed within 5 business days. The taxpayer can verify the refund amount by checking balance from the My Payment tab under the Transaction History section in the e-Services portal. 

Important Notes: 

• Before submitting the refund claim, ensure that bank account details are provided on the registration form. Refund requests that do not have bank account details will be rejected. 

• A bank account validation letter / certificate must be provided to the FTA. This letter 

must be issued and stamped by your bank and include the details about the account holder name (must be the same as the taxable person’s name as registered with the FTA), bank’s name, bank’s address, SWIFT/ BIC and the IBAN. The letter/ certificate shall be uploaded as an attachment to the refund application. 

• If your bank is international and does not have a correspondent bank in the UAE, the refund payment may take more than 5 business days, and you will incur the transfer fees charged by your bank. 

Wrapping Up 

It is important for businesses in Dubai, UAE to master VAT or consult tax advisory services to ensure compliance. The VAT refund improves business’s cash flows. It is important for businesses in UAE to maintain the records of documentations and invoices which may also be challenging for them. The precise record soothes the process of VAT refund. Seek professional help today to ensure compliance with VAT regulations in UAE! 

SS&Co. Ensuring Your VAT Compliance in UAE 

At SS&Co, we offer taxation & Compliance services to help you stay compliant, minimize risks, and optimize your tax strategy for maximum efficiency. Our commitment is to deliver tailored, forward-thinking advice that not only meets immediate tax needs but also anticipates future challenges, ensuring our clients thrive in an ever-evolving global marketplace.