UAE introduces new VAT refund scheme for online shopping: FTA
Said to be a world first, FTA's move to raise UAE's 'digital competitiveness'
Dubai: The UAE has brought in a new VAT refund process for ecommerce purchases made by tourists during their stay in the country. This is said to be a world first.
The new system - done in collaboration with Planet, the authorized operator of the VAT refund system for tourists - aligns with FTA's (Federal Tax Authority) plans to adopt 'proactive solutions'.
The refunds will happen when the tourist exits the country. In order to avail of the refunds:
- Tourists in the UAE can apply for VAT refunds directly through e-commerce platforms registered with the Authority before their purchases are shipped.
- They can do so by providing their travel document details and relevant personal information to verify their eligibility at the time of purchase.
- The VAT refund registration is completed once the tourist’s identity is verified during delivery or online order fulfillment.
"We are proud of the success of the Federal Tax Authority in launching the world’s first electronic system that enables tourists to recover VAT on their e-commerce purchases during their stay in the UAE," said said Khalid Ali Al Bustani, Director General of the Federal Tax Authority. "This is part of the Authority’s ongoing efforts to develop its systems and provide innovative services that set global benchmarks.”
The UAE already offers full VAT refund for tourists on all of their physical store shopping. Now, the same incentive is being extended when visitors to the country do online-shopping too.
The benefits to the local e-shopping marketplace will be 'immense', say local ecommerce industry sources. "There could be many products and categories online that will benefit from zero VAT for visitors to the UAE," said an online retailer. "The biggest gains will be felt in demand for higher priced categories bought online by tourists."
The VAT rate in the UAE, which went into effect January 2018, is 5%.
These plans are based on the need for 'creativity to meet future demands' and 'enhancing the UAE's competitiveness in providing services'.
"This significant achievement contributes to improving the country’s digital competitiveness and innovation performance indicators globally, supporting the UAE’s leadership in all sectors, including tourism and e-commerce," said a statement.
VAT refund for tourists
It was more than two years ago that the UAE brought in a fully digital VAT refund system for tourists. This system is entirely paperless. This is what tourists have been doing on their physical store purchases for VAT reclaim:
- All that tourists need to do is scan their passports, complete purchase transactions, and automatically share them in the form of digital invoices.
- Tourists can also verify their invoices via the shoppers’ portal, providing a seamless shopping experience with fast and fully digital VAT refund procedures for eligible purchases.
"It allows tourists to recover refundable VAT on all their purchases during their stay in the UAE, whether from traditional stores or e-commerce platforms registered with the Authority," said Al Bustani. "The VAT refund procedures are processed smoothly, quickly, and efficiently, from the moment of purchase until the refund is completed when the tourist departs the country."