The United Arab Emirates charges a 5% value-added tax (VAT), so visitors to Ras Al Khaimah and other parts of the UAE cannot avoid paying VAT when they eat out at restaurants, shop at a boutique, or pay a tour operator for a desert safari.
That said, tourists can get a VAT refund on some of their purchases in the UAE. Here is a comprehensive discussion on the VAT refund scheme for tourists. May this serve as your ultimate guide to claiming VAT refunds on your UAE purchases.
Understanding VAT Refunds: What You Need to Know
VAT refunds are part of the Tax Refund for Tourists Scheme, which was instituted in November 2018. Under this initiative, tourists can receive up to 87% of the VAT they paid minus a service fee of AED 4.80 per tax-free tag generated.
The VAT refund system falls under the jurisdiction of the Federal Tax Authority (FTA). Planet is the sole entity authorized by the FTA to record and process these tax refunds.
What Is VAT and How Does a Refund Work?
VAT is an indirect consumption tax imposed on goods and services. It’s similar to but not the same as the sales tax. Whereas the sales tax is collected by the retailer and levied on the final sale of goods, the value-added tax is collected and incurred at every stage of the supply chain by VAT-registered businesses. VAT applies to both goods and services.
How does a VAT refund work? A tourist shopping in-store at one of the malls in Ras Al Khaimah can get a VAT refund by informing a shop assistant that they would like to request a tax-free purchase. If a tourist is making the purchase online, they will need to opt for a tax refund upon checkout.
The request (and the subsequent processes) will generate a tax-free tag that will be affixed to the back of the sales receipt. If the sale is online, a digital tax-free voucher will be similarly created.
When the tourist is about to depart the UAE, they must validate their tax-free purchases at the airport, seaport, or border port by presenting their tax-free sales receipts or vouchers at one of the designated validation points. Upon successful validation, the VAT refund will be available for crediting or claiming.
Who Is Eligible for a VAT Refund?
Only overseas tourists are eligible for a VAT refund in the UAE. You’re deemed to be eligible if:
- You are a natural person 18 years or older.
- You are not a resident of the UAE.
- You are not a crew member on a flight, cruise, or aircraft, currently in the UAE in that capacity.
You must be in the UAE when making a VAT refund-eligible purchase. Your online purchases on UAE websites may be tax-free only if you’re shopping from the UAE. If you bought online, you must personally receive your order (upon delivery) and show your passport or Gulf Cooperation Council ID (if you’re a resident of another GCC country).
If you tick all these boxes, check if you also fulfill other eligibility requirements. For instance, VAT refunds are available only for purchased goods. As such, you can’t claim a VAT refund in the UAE for meals, tickets to outdoor activities, accommodation at Ras Al Khaimah hotels, car rentals, and other similar expenditures.
Additionally, a VAT refund is available for goods purchased in the UAE if:
- The retailer is participating in the Tax Refund for Tourists scheme; look for a shop that says Tax-Free Shopping or something similar.
- The minimum expenditure is AED 250.
- The goods purchased are being exported out of the UAE.
In other words, a perfume bought in the UAE that you intend to bring home, packaging intact, to your home country is eligible for a VAT refund. Opening the box and using the perfume while in the UAE may render that purchase ineligible for a VAT refund.
Here’s a handy guideline on the types of UAE purchases for which you cannot claim a VAT refund:
- Services
- Motor vehicles, boats, and aircraft
- Goods that you have fully or partially consumed in the UAE
- Goods you’re not personally bringing out of the UAE; i.e., those not in your company at the time they’re leaving the UAE
The Different Types of VAT Refunds (e.g., Tourists, Businesses)
In the UAE, there are two primary types of VAT refunds. The first one is the VAT refund for tourists. The other is the VAT refund for VAT businesses.
VAT refund for tourists: The VAT refund for tourists is the topic of our current discussion. It is available under the Tax Refund for Tourists scheme.
VAT refund for businesses: Businesses in the UAE whose taxable supplies and imports exceed the mandatory VAT registration threshold of AED 375,000 must register for VAT. Once registered, they will pay input tax on their business expenses and likewise collect output tax from their customers on the sales of their VAT-taxable goods and services.
If their input tax (VAT paid) exceeds their output tax (VAT collected) for a given tax period, they can submit their VAT return on the EmaraTax portal and get any eligible excess input tax refunded.
Again, the discussion in this article is about the VAT refund you can claim as a tourist shopping tax-free in the UAE, not the VAT refund available to VAT businesses in the UAE.
Your Step-by-Step Guide to Claiming a VAT Refund
What do you need to do to ensure you can claim your VAT refund? Follow these guidelines.
Pre-Trip Preparation: Your VAT Refund Checklist
Refer to the following checklist to ensure VAT refund eligibility before making your tax-free purchase:
- Participating retailer: Your purchases must be made with a retailer participating in the Tax Refund for Tourists scheme.
- Minimum purchase requirement: You must spend at least AED 250.
- Passport or GCC ID: You will need to present your passport or your GCC ID and provide your information upon payment.
At the Store: Getting Your Tax-Free Form
At the store, inform the shop assistant that you’re requesting a tax-free purchase. Upon payment, the cashier will scan your passport or GCC ID and capture your information for entry into the Planet payment system.
Next, the shop assistant will place a tax-free tag on the back of your sales receipt. Collect and keep that receipt in a safe place.
Note: You can keep track of your tax-free purchases on the Planet Shopper Portal or through the Planet Tax Free ME mobile application. You will receive a link via SMS to the portal whenever you complete a tax-free purchase.
At the Airport: The VAT Validation Process
Before departing the UAE, request your VAT refund. Note that VAT refund requests must be made within 90 days of the tax-free purchase.
At the airport, seaport, or border port, proceed to one of the VAT refund validation points before you check in your luggage. Validation points may be self-service kiosks or manned Planet counters.
At a self-service kiosk, scan your passport or GCC ID or enter your passport or GCC ID number manually. Follow the prompts on the screen. You will be asked to scan the sales invoices or QR codes of your tax-free purchases. If everything is in order, the kiosk will prompt you to choose your preferred VAT refund method. Otherwise, it will instruct you to proceed to a Planet counter (located after immigration) for manual inspection.
At a manned Planet counter, present your passport or GCC ID to a member of the staff. Present the sales invoices or QR codes when requested to do so. Note that the Planet staff may even ask you to present the actual goods purchased. If everything checks out, the Planet staff will ask you to nominate your refund method.
How to Receive Your Refund: Cash, Credit, or Bank Transfer
Once your sales receipts or your goods have been inspected and your tax-free purchases validated, the self-service kiosk or the Planet staff will ask you to name your preferred refund method. You may choose to have your refund:
- Credited to your credit card
- Credited to your debit card
- Credited to your digital wallet
- Paid in cash
Please note that if you opt for cash payment, you may collect your cash reimbursement at a participating foreign exchange provider beyond passport control. Cash refunds also have a limit of AED 35,000 per tourist. If your refund is greater than that, you must provide a credit or debit card account instead.
Common VAT Refund Questions and Challenges
What is the Minimum Purchase Amount for a Refund?
The minimum purchase amount for a refund is AED 250. This applies to purchases online and in-store by an overseas tourist shopping in the UAE.
What Documents Do I Need to Claim My Refund?
To claim your refund at the port validation kiosk or desk, you need:
- Your passport or GCC ID
- Your sales receipts (tagged tax-free at the back)
- Your boarding pass (if applicable)
If the Planet staff requires it, you must also present the actual goods purchased for manual inspection. Finally, you will also need a credit card or debit card if claiming a refund through this method.
What Happens If My Claim is Rejected or Delayed?
If your claim is rejected or delayed, address the cause of the rejection or delay. For instance, present the goods for inspection if requested to do so. You must resolve the issue before you leave the UAE, as failure to file a claim before departing will forfeit your refund.
