All about VAT on Travel and Tourism in the UAE

October 4, 2021Dated:  | |

Travel and Tourism is a thriving industry in the UAE and the hospitality sector is one of the most important business sectors in the mainland attracting millions of people to the mainland. The sector contributes immensely to the economy of the country with the tourist spending in the UAE projected to reach Dh 205.5 billion by 2022 according to a study by the Dubai Chamber of Commerce and Industry. The services included in the travel and tourism industry comprise a wide range of amenities like airlines and transportation, Restaurant and accommodation services, recreational and entertainment charges, telecommunication, agency services, tour packages, and other activities such as exhibitions or conferences.

According to the VAT (Value Added Tax) regulations in the UAE, all these services are subjected to VAT regulations with a standard rate of 5% added to the price even if the services are booked from outside of the Gulf countries. However, a Tax- Free Purchase Scheme is in place, whereby the purchases made by an overseas tourist are subjected to a tax refund scheme under certain conditions.

As defined by the FTA (Federal Tax Authority) of the purpose of VAT in the UAE, an oversees tourist is any natural person who is not resident in the UAE or any of the other implementing states who is not a crew member on a flight or cruise and is leaving the UAE to outside the implementing states. When the concerned individual makes a taxable purchase in the UAE, a standard VAT rate is added to the price of the purchased goods or services whether it be a restaurant bill or a conference fee. In addition, if the value of the tax-inclusive purchases made by the overseas tourist in the mainland is AED 250 or more, they can request a tax refund, given they are eligible for the tax-refund scheme.

To be eligible for the tax-refund scheme in the UAE, the person should meet:

  1. The conditions as specified in the executive regulations on Value Added Tax (Clause (2) of Article 68).
  2. The Goods are purchased from a Retailer who is participating in the Scheme. 
  3. The purchase of the Goods from the Retailer is conducted in accordance with requirements as determined in a decision issued by the Chairman. 

The Export of Goods is conducted in accordance with requirements as determined in a 

  1. The decision issued by the Chairman. 
  2. The Goods are not excluded from the Scheme by the Authority. 
  3.  

The retailer eligible to be a part of the tax-refund scheme in the UAE must:

1) Be registered with the Federal Tax Authority and hold a valid Tax Registration Number for   VAT purposes. 

2) Be a seller of goods that are not excluded from the refund as determined by the Federal Tax Authority. 

3) Submit an application to join the scheme as determined by the Federal Tax Authority and 

 be subject to a credit check by the Operator. 

4) Regularly submit VAT returns and settle payable tax to the FTA. 

The following Goods shall be excluded from the Tax Refunds for Tourists Scheme: 

  1. Goods that are not accompanied by the Overseas Tourist at the time of leaving the State. 
  2. Goods that have been consumed, in full or in part, in the State or any other Implementing State. 
  3. Motor vehicles, boats, and aircraft.

The tourists’ tax-free tag needs to be validated within 90 days of the purchase. If receipts are not validated within 90 days, the tax-free tag expires and VAT cannot be claimed.

The right understanding of VAT rules and regulations are very important whilst doing a business in Dubai. For the past 17 years, Flying Colour has been helping clients by providing them required advices and assistance on tax-related matters. Please feel free to mail your queries at info@flyingcolour.com or contact us at +971 4 4542366.

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