Special Refund Schemes in UAE VAT
Disclaimer: The company names and scenarios mentioned in this article are fictional and created for illustrative purposes only. Any resemblance to real entities is purely coincidental.
The UAE VAT system allows businesses to recover the VAT they pay on expenses through their VAT returns. However, there are certain situations where specific groups—such as foreign businesses, government entities, and international organisations—can claim VAT refunds under Special Refund Schemes without being registered for VAT in the UAE.
Understanding these schemes is essential because the eligibility rules, refund timelines, and documentation requirements differ from standard VAT recovery. In this article, we break down the major special refund categories, real-world examples, and practical tips for successful claims.
What Are Special Refund Schemes?
Special Refund Schemes under UAE VAT are designed to allow specific categories of persons to recover VAT they have incurred in the UAE without engaging in taxable supplies here. These schemes are provided under:
- Federal Decree-Law No. 8 of 2017 on Value Added Tax
- Cabinet Decision No. 52 of 2017 (Executive Regulations)
- Relevant FTA guides and public clarifications
Categories Eligible for Special Refunds
1. Foreign Businesses VAT Refund
Who qualifies?
Foreign businesses that are not resident in the UAE and do not have a place of establishment here.
Example:
A German company attends a trade fair in Dubai and pays VAT on hotel accommodation and event participation. It can apply for a refund if its country has reciprocal VAT refund arrangements with the UAE.
Key conditions:
- No taxable supplies in the UAE
- Not a non-resident who is required to register for VAT in the UAE
- The country of residence must offer similar refunds to UAE businesses
2. Tourists VAT Refund Scheme
Who qualifies?
Tourists visiting the UAE can claim VAT refunds on eligible purchases made from registered retailers participating in the Tourist Refund Scheme.
Example:
A tourist from Japan buys electronics worth AED 5,000 from a registered store. At departure from Dubai Airport, they claim a VAT refund via Planet Payment kiosks.
Key conditions:
- Goods must be exported in the tourist’s luggage within 90 days
- Minimum spend threshold applies
- Refund processed via approved operators
3. VAT Refunds for Foreign Governments, Diplomatic Missions, and International Organisations
Who qualifies?
Certain foreign embassies, consulates, and international organisations are recognised by the UAE.
Example:
The Consulate of Country X rents office premises in Abu Dhabi and pays VAT on rent. As an approved diplomatic mission, it can claim VAT back.Key conditions:
- Must be listed in the UAE’s approved diplomatic list
- Refundable VAT is limited to eligible expenses
- Requires Ministry of Foreign Affairs endorsement
4. VAT Refund for New Residences Built by UAE Nationals
Who qualifies?
UAE nationals who build a new residence for personal use.
Example:
A UAE national constructs a villa for personal residence and pays VAT on construction materials and contractor fees. Upon completion, they can claim a refund.
Key conditions:
- Refund claim must be made within 6 months of completion
- Only eligible for first-time residential construction
5. VAT Refund for Designated Charities
Who qualifies?
Charitable organisations approved by the Ministry of Community Development.
Example:
A registered UAE charity organises a fundraising event and pays VAT on venue hire and catering. These costs can be refunded under the special scheme.
Key conditions:
- Must be an officially listed charity in the UAE
- Refunds apply to VAT paid on qualifying goods and services
Documentation Required
The FTA requires precise documentation to process special refund claims, including:
- Original tax invoices
- Proof of payment
- Official approvals or endorsements (where applicable)
- Completed refund forms (available on the FTA portal)
- Proof of export for tourist and foreign business refunds
Timelines for Refund Claims
- Foreign Business Refunds: Within 6 months after the calendar year ends
- Tourist Refunds: At the point of departure from the UAE
- Diplomatic / International Organisations: As per bilateral agreements, usually annually
- New Residence Refunds: Within 6 months of building completion
- Charities: Usually quarterly or annually, as per FTA guidelines
Common Reasons for Rejection
- Submitting incomplete documentation
- Missing refund deadlines
- Not meeting eligibility criteria
- Claiming VAT on non-qualifying expenses
- Providing invoices that are not VAT-compliant
Real-World Scenario
Scenario:
A UK-based engineering firm participates in a Dubai infrastructure expo. The company spends AED 60,000 on exhibition space, hotel stays, and marketing within the UAE, all with VAT included. Since the UK has a reciprocal VAT refund arrangement with the UAE, the firm can claim back approximately AED 2,857 (5% of qualifying expenses) through the FTA’s foreign business refund scheme.
How Flyingcolour Tax Consultant Can Help
At Flyingcolour Tax Consultant LLC, we:
- Assess your eligibility for special VAT refunds
- Prepare and submit refund applications with the FTA
- Ensure your documentation meets compliance standards
- Advice on structuring purchases to maximise VAT recovery
To learn more about Special Refund Schemes in UAE VAT: Who Qualifies and How to Claim, book a free consultation with one of the Flyingcolour team advisors.
Disclaimer: The information provided in this blog is based on our understanding of current tax laws and regulations. It is intended for general informational purposes only and does not constitute professional tax advice, consultation, or representation. The author and publisher are not responsible for any errors or omissions, or for any actions taken based on the information contained in this blog.