The introduction of Value Added Tax (VAT) in the United Arab Emirates (UAE) in 2018 brought with it a comprehensive framework for domestic businesses, but also provided mechanisms for foreign businesses to recover VAT incurred in the UAE. One such mechanism is the VAT Refund Scheme for Foreign Businesses, a unique initiative allowing eligible overseas businesses to claim back VAT paid on expenses incurred within the UAE, provided certain conditions are met.
This blog provides a detailed look at how the VAT Refund Scheme works for foreign entities, the eligibility criteria, the refund process, timelines, documentation requirements, and how professional assistance can help streamline your refund application.
What Is the UAE VAT Refund Scheme for Foreign Businesses?
The UAE VAT Refund Scheme for Foreign Businesses allows companies that are not resident in the UAE (and not VAT-registered in the UAE) to claim a refund on VAT they’ve paid on goods and services used within the country. This initiative promotes international trade and investment by ensuring that non-resident entities are not unfairly burdened with VAT costs while conducting eligible business activities in the UAE.
This scheme is particularly relevant for foreign exhibitors, delegates, service providers, and procurement teams attending or supporting trade events, business meetings, or transactions in the UAE.
Eligibility Criteria for VAT Refund
To apply for a VAT refund in the UAE, a foreign business must satisfy all of the following conditions:
- The applicant must be established outside the UAE and outside the implementing GCC states.
- The applicant must not have a fixed place of establishment or tax residence in the UAE.
- The applicant must not be registered or required to register for VAT in the UAE.
- The VAT incurred must have been for business purposes (not for personal consumption).
- The applicant’s country of establishment must provide reciprocal refund arrangements to UAE businesses (as determined by the UAE Federal Tax Authority).
Countries currently eligible for the refund scheme include the United Kingdom, Germany, the Netherlands, Switzerland, South Africa, and several others. Businesses from non-reciprocating countries cannot apply for a refund.
Types of Expenses Eligible for Refund
The UAE VAT Refund Scheme permits foreign businesses to recover VAT on specific business-related expenses, including:
- Hotel accommodation and hospitality expenses
- Exhibition and conference participation costs
- Professional service fees (legal, accounting, consulting)
- Local transport and logistics services
- Office rental and administrative charges (if temporary in nature)
- Goods purchased for re-export
It’s important to note that VAT on entertainment, motor vehicles used for personal purposes, and goods consumed or sold within the UAE is not eligible for a refund.
Refund Application Period and Deadlines
Foreign businesses must submit their VAT refund claims to the Federal Tax Authority (FTA) within a specific timeline:
- The refund claim must relate to VAT incurred in a calendar year (January 1 to December 31).
- Applications must be submitted no later than August 31 of the following year.
- The minimum claim amount per application is AED 2,000.
Refunds are processed annually. There is no provision for quarterly or monthly refunds for foreign businesses under this scheme.
Required Documents for VAT Refund Claim
Applicants must compile and submit a comprehensive set of documents to support their refund claim. These include:
- A copy of the trade license or certificate of incorporation
- Proof of establishment outside the UAE
- Original tax invoices clearly stating UAE VAT
- Proof of payment for the goods or services
- A summary of VAT paid and the nature of each expense
- Bank account details for refund transfer
- Power of attorney if a consultant is appointed
All documents must be translated into Arabic (if not already in English or Arabic) and certified as required by the FTA.
Promotional Note: Let PEAK BCS Handle Your VAT Refund Application
PEAK Business Consultancy Services specializes in assisting foreign businesses with the UAE VAT refund process. From eligibility checks and documentation review to preparing and submitting the refund application, we ensure compliance with FTA requirements while maximizing the value of your claim. Visit www.peakbcs.com to connect with a tax consultant who understands international business dynamics.
FTA Review and Refund Processing Timeline
Once submitted, the FTA will review the refund application and may request additional information or clarification. Generally, the FTA aims to process complete applications within 4 months of submission. The refund amount, once approved, is credited to the applicant’s nominated bank account in AED.
In case of rejection or partial approval, the FTA provides the reason, and applicants may submit supporting evidence or lodge an objection, if necessary.
Common Reasons for Rejection of VAT Refund Applications
Foreign businesses must ensure full compliance to avoid refund rejection. Common issues include:
- Missing or invalid tax invoices
- Claiming VAT on non-business or personal expenses
- Submission after the deadline (August 31)
- Ineligibility due to non-reciprocating home country
- Incorrect or incomplete documentation
Working with a qualified VAT consultant like PEAK BCS can help avoid these errors and improve refund success rates.
Important Notes for Event and Exhibition Organizers
Foreign businesses that attend or organize exhibitions, conferences, or trade shows in the UAE often incur significant expenses. These activities usually qualify for VAT recovery, provided proper invoices and payment records are maintained. The refund scheme is particularly beneficial for:
- Overseas exhibitors and sponsors
- Foreign media and marketing companies
- Consultants and service providers temporarily operating in the UAE
PEAK BCS can assist with event-specific VAT refund planning and post-event reporting.
FAQs: VAT Refund for Foreign Businesses
Can a foreign business registered in another GCC country apply?
No. Only businesses from countries outside the GCC implementing states are eligible. If a foreign entity is based in another GCC country that applies VAT, it must follow different procedures.
Can VAT be recovered on capital goods purchased in the UAE?
Only if the capital goods were intended for re-export or temporary use. VAT on items consumed or retained in the UAE is generally not refundable.
Is a UAE-based agent or consultant allowed to submit the application?
Yes. A foreign business can appoint a UAE-based VAT consultant or tax agent through a power of attorney to submit the claim on their behalf.
Conclusion
The UAE VAT Refund Scheme for Foreign Businesses is a strategic initiative that enhances the country’s attractiveness to global companies and trade professionals. While the refund process is well-structured, it requires careful attention to documentation, eligibility rules, and deadlines. Businesses that invest the time and resources to manage their VAT recovery effectively can unlock significant savings on their operational expenses in the UAE.
PEAK Business Consultancy Services is your trusted partner for VAT refunds in the UAE. Whether you’ve attended a trade fair, offered services to UAE clients, or procured goods temporarily, we’ll help you reclaim the VAT you’ve paid—accurately, efficiently, and on time. Visit www.peakbcs.com to get started with your refund claim today.
