SKP Group
SKP GCC VAT Alert
17 September 2018
UAE VAT Updates: Clarification on Tax Invoices and VAT Tourist Refund Scheme
 
VAT Clarification on Tax Invoices
The clarification is published to elaborate on the application of Article 59 of the Executive Regulations that prescribes the requirements of a tax invoice and the circumstances for issuing an invoice. Some of the key aspects of the regulations are explained below:
 
Issue and Delivery of Tax Invoice
  • Tax invoice including a simplified tax invoice needs to be issued and delivered to the recipient in case where a standard-rated supply is made. Any arrangement for printing of a tax invoice only on request by the recipient is not valid under the UAE VAT legislation and it is mandatory to issue and deliver a tax invoice in case of all supplies.
Disclosure Requirements in an Invoice
  • Tax invoice issued under UAE VAT must contain the gross amount payable, the tax amount payable and the net amount in AED.
  • Furthermore, the tax invoice should contain item-wise bifurcation of tax amount payable and the net amount; however, the businesses may choose to not disclose the gross amount for each line item.
  • In case of a simplified tax invoice, the same should contain the total consideration and the tax amount charged. There is no requirement to disclose the net value (i.e., the amount excluding VAT) item-wise.
  • Tax invoice issued in a foreign currency should disclose the tax amount converted to AED and the exchange rate used for the conversion. In case if the tax amount is not disclosed in AED, the invoice would not be considered  valid under UAE VAT.
  • Rounding off on tax invoice should be performed on a line item based on  the nearest whole fils.
 The table below captures how this will unfold in the disclosure (in case of a tax invoice and a simplified tax invoice) for ease of reference.

Tax invoice
Product Quantity Rate Taxable amount (USD) Exchange rate Taxable amount (AED) VAT rate VAT amount (AED)
A 10 20 200 3.6725 734.50 5% 36.73
B 5 60 300 3.6725 1,101.75 5% 55.09
C 1 200 200 3.6725 734.50 5% 36.73
Total     650   2,570.75   128.55
Gross Amount Payable AED 2,699.3
 
Simplified Tax Invoice
Product Amount (AED)
A 734.50
B 1,101.75
C 734.50
Total 2,570.75
VAT at the rate of 5% 128.55
Gross Amount Payable 2,699.3
 
Cabinet decision on rax refund to tourists
After much deliberation by the Federal Tax Authority (FTA) Cabinet, the VAT refund scheme for tourists within UAE was issued recently. Some of the key aspects to take into consideration in relation to the scheme are listed below.
 
Who is eligible to apply for the refund
  • Overseas tourist who is in the state during the purchase of goods from the supplier and who is not a resident in the UAE or any of the other implementing states may apply subject to fulfillment of below conditions:
    1. The benefit of the scheme is restricted to any natural person who is not resident in the UAE or any of the other implementing states, and who is not a crew member on a flight or cruise and is leaving.
    2. The overseas tourist communicates the intention to depart from the UAE within 90 days from that date of supply with the goods.
    3. The goods are exported by the overseas tourist to a place outside the implementing states within 3 months from the date of supply (subject to conditions and verifications as prescribed).
    4. Goods are purchased from a retailer who is participating in the scheme.
    5. The purchase of the goods from the retailer is conducted in accordance with requirements as determined in a decision to be issued by the Chairman.
    6. The export of goods is conducted in accordance with requirements as determined in a decision to be issued by the Chairman.
    7. The Goods are not specifically excluded from the scheme by the FTA.
 Registration by a retailer
  • A retailer wishing to register in the Value Added Tax Refunds for Tourist Scheme will be required to:
    1. Register with the FTA and hold a valid VAT registration number;
    2. Supply goods which are not excluded from the refund scheme by the FTA;
    3. Submit an application to register under the scheme (subject to a credit check by the operator of VAT refund scheme as appointed by the FTA);
    4. Settle VAT payments and submit VAT returns on a regular basis.
 Procedure for claim of refund
  • The overseas tourist has to convey its intentions to avail the scheme at the time of purchase of goods.
  • Based on the above, the retailer shall provide the overseas tourist with requisite documents as may be prescribed by the FTA including the tax invoice in order to enable the tourist to avail the VAT refund.
  • Application to avail the refund has to be made by the tourist to the scheme operator.
  • Such refund shall be processed by the scheme operator subject to satisfactory verification of documents to be stipulated by the FTA and post deduction of administrative charges.
  • The goods against which the refund claim is filed may be subject to validation and inspection according to the conditions stipulated by the FTA to be done jointly by the operator and the UAE Customs Department.
  • The operator shall be eligible to claim a reimbursement of the VAT refund from the retailer where such refund is issued correctly as per the provisions laid by the FTA.
  • Subsequently, the retailer shall be eligible to treat the amount of tax reimbursed as a reduction of output tax that arises in the tax period in which the refund was paid to the overseas tourist.
Documentation and Procedural Requirements
The FTA is yet to prescribe the requirements in relation to procedures, evidence, verification, documentation and record-keeping requirements to be met by the overseas tourist, the retailer, the operator and any other person to whom the scheme is applicable.
 
Date of effect of the scheme
The scheme to provide VAT refund to tourist shall come into effect on a date notified by the FTA which shall be on or before 1 January 2019.
SKP comments
Considering the clarification issued by FTA, businesses should ensure their tax invoices adhere to the requirements of the UAE VAT legislature. Non-compliance with the same may render the invoice invalid and may attract administrative penalties on the supplier. Furthermore, it is recommended that adequate steps are taken to upgrade the IT systems in order to ensure that there are minimal manual interventions and the invoices are in lines with the FTA requirements.

Additionally, implementation of VAT tourist refund scheme is a positive step towards ensuring that UAE continues to be an ideal tourist destination for shoppers, thereby promoting the domestic trade and tourism industry. Businesses operating under the B2C model should take the initiative and get registered with the FTA for the refund scheme in order to remain competitive, boost sales and promote the trade in UAE.

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