Vat Refund Explained
Tourists can now start collecting refunds to VAT charged on their purchases. Image Credit: Gulf News

Dubai: The UAE has officially joined the list of countries that offer some tax money back to tourists, with the new VAT refund scheme taking into effect on Sunday.

The Federal Tax Authority (FTA) said that starting November 18, foreigners making purchases while on vacation in UAE would be able to start claiming back the value-added tax (VAT) charged to their purchases.

Since the implementation of VAT, retailers have been tacking VAT onto transactions made not just by residents but tourists as well. But things have changed as of Sunday, when the refund scheme covering more than 4,500 retail outlets took effect.

Tourists can now start claiming refunds at Abu Dhabi, Dubai and Sharjah International Airports. Each traveller can get a cash back worth up to Dh10,000 daily.

However, a 15 per cent administrative fee will apply to all refunds, as well as a 4.8 per cent tag fee for every individual claim.

The VAT refund scheme is seen to benefit both the retail and tourism sectors in UAE. This will encourage tourists to spend more and boost sales transactions at the retail level.

“The VAT refund scheme will have a positive impact on tourism. It will encourage tourists visiting Dubai to spend more on retail as they will be paying very competitive rates which could be the best worldwide after receiving their refunds,” said Premjit Bangara, general manager for travel at Sharaf Travel Services in Dubai.

“It will also bring the UAE into an elite bunch of nations offering VAT refunds to foreign tourists,” he added

Tourism spending is a major economic driver in the country. In 2017 alone, tourists from all over the world spent $28 billion (Dh102 billion) in Dubai.

By 2021, international tourists are forecast to splurge some $43.8 billion (Dh160 billion) on bags, shoes, jewellery and other items at retail shops across the emirate.

According to the latest analysis by Dubai Chamber of Commerce, Dubai has firmly positioned itself as one of the world’s top shopping destinations, citing that the emirate’s retail market size expanded to $35 billion in 2017, accounting for approximately 67 per cent of the UAE’s total retail market size.

If you’re a tourist, here’s what you need to know about the VAT refund scheme:

Who are eligible to get a refund?

Tourists visiting the UAE who are at least 18 years old. The visitor must also intend to exit the UAE along with the purchased goods within 90 days.

How much is the minimum purchase required to get a refund?

The VAT paid cannot be refunded unless the total value of tax-inclusive purchases is at least Dh250.

Where can tourists claim the refund?

Tourists can get their money back at the airports in Abu Dhabi, Dubai and Sharjah

Which transactions are eligible for a tax refund?

Purchases made from November 18, 2018 will qualify for a refund.

Is there a maximum limit on refunds?

Yes. Each tourist can get cash back worth no more than Dh10,000 daily.

Can I buy from just any store and get a tax refund?

No. The scheme has so far enlisted more than 4,500 stores. The number, however, is expected to increase next month, providing more options for shoppers.