Foreign Business VAT Recovery in the UAE

Foreign Business VAT Recovery in the UAE

Introduction

The VAT implementation has now been active in the UAE for over a year following the GCC nation’s agreement. It is now successfully implemented at a 5% rate, and further legislation is regularly coming into effect surrounding it and making the system friendlier to businesses and consumers.

Numerous questions have come forward from both these consumers and businesses with regards to the VAT, and these require clarification from the relevant government entities.

A specific area which has recently received clarification concerns foreign entities and the ability to recover VAT incurred in the UAE.

Federal Tax Authority Conditions for Recovery

There are a few primary requirements before the VAT recovery can occur, and these are as follows. Firstly, the business entity looking to recover the VAT must not have a place of establishment in the UAE or any other GCC nations. Secondly, the body must not be a taxable person in the UAE. The reason for these two points is that if either of them is not the case, the entity will not be in a position to recover VAT.

The third point is that the entity should be established with the appropriate authority in their jurisdiction. This jurisdiction should have a VAT implementation system of its own which would provide refunds to UAE companies in a similar situation.