Dubai: The Federal Tax Authority (FTA) has announced it will allow foreign companies to claim back Value Added Tax (VAT) incurred while doing business in the UAE, in a move that experts say will attract greater investment into the country.

In a new guide, titled ‘VAT Refunds for Business Visitors’, the tax regulator sets out four conditions upon which foreign firms will be able to recover their VAT.

To be eligible for the refund, the first condition is that businesses must not have a place of establishment, or fixed establishment, in the UAE or in any of the other VAT-implementing GCC states.

Secondly, the FTA says, such foreign businesses must not be considered a taxable person in the UAE. Thirdly, they must be registered as an establishment with a competent authority in the jurisdiction in which they are established; and finally, they must be from a country that implements VAT and that reciprocates VAT refunds to UAE businesses under similar conditions.

“We believe it is a great initiative by the UAE authorities and will provide incentive to foreign businesses visiting UAE to attend and participate in the exhibitions, conferences, trade fairs and business meetings,” said Anju Krishan, a partner at Haynes Path Management Consultancy.

The FTA’s director-general, Khalid Ali Al Bustani, described the refund procedure as clear and transparent, noting that it supports economic activities in the areas that are popular with visiting businesses, including tourism, trade, exhibitions, and conferences.

Al Bustani added that reciprocity was a key condition for the procedure.

Currently, it is unclear which countries will be eligible for the scheme. The FTA has not disclosed which countries intend to reciprocate the programme.

On this, Krishan said she hoped for more clarity.

“We believe further clarity could be provided by issuing a list of countries that are reciprocating VAT refunds to UAE businesses,” she said.

In a statement released on Saturday, the FTA added that the minimum claim amount of each VAT refund application submitted by business visitors would Dh2,000, which may consist of a single purchase or multiple purchases.

The FTA said it “urged potential applicants to hold on to the original tax invoices on the purchases for which they would like to reclaim VAT,” as they will be required to be submitted along with the refund applications.

Krishan said that it could be an “administrative hassle to maintain the original tax invoices for the entire year before the claim can be made for refund by the foreign business visitors.”