|15 November, 2018

More than 4,500 retailers already signed up for VAT refunds scheme for tourists

Refund scheme's operator expects that up to 10,000 stores will be participating by early 2019

Image used for illustrative purpose. Customers in a gold shop in UAE.

Image used for illustrative purpose. Customers in a gold shop in UAE.

Dubai Tourism

Tourists will be able to reclaim value added tax on goods bought for use outside the United Arab Emirates as of Sunday, offering a potential boost to the country’s retailers who have experienced a challenging year.

As of Sunday, November 18, tourists will be able to claim VAT refunds on goods bought at participating stores when they fly out of Dubai International Airport (DXB,) Abu Dhabi International Airport (AUH) and Sharjah Airport (SHJ).

As of December 16, the UAE’s remaining airports will be included in the refund scheme as well as participating land and sea ports.

At first, 200 staff members from operator Planet Tax Free will administrate the service at the three airports, with more expected to be added at a later date. From February, self-service terminals will be installed at airports.

The launch will come as welcome news to the UAE’s retail sector, particularly the gold and jewellery sector, which is believed to have been impacted by VAT, along with the strength of the US dollar in 2018.

Speaking at a press conference on Wednesday, Khalid Al Bustani, director-general of the Federal Tax Authority, said 4,507 stores have signed up to the scheme, including ‘most’ major shopping malls in Dubai and Abu Dhabi.

He described the system as ‘a fully electronic system that is designed and operated with the minimal of manual intervention.’

He added: “We are a tourist destination, the VAT system is designed to support the economy and the tourist experience in the UAE. We will be working with Planet [Tax Free] to ensure that there will be a wide usage of the tourist refund.”

Gary Byrne, director of new markets and group strategic partnerships for Planet Tax Free, said demand suggests as many as 10,000 stores will be signed up by early 2018. 

How will it work? 

In the shop

  • Tourists will need to shop in a participating store, which will be identified by a tax refund poster. 
  • The shopper will need to present their either their passport, a copy of it, or a least a passport number when they pay for their goods.
  • The store will verify that the tourist is eligible, then issue a tag which will be attached to the back of the invoice.
  • There will be a minimum purchase requirement of 250 United Arab Emirates dirhams, which can be from multiple invoices.

At the airport

  • The tourist will present the tag, passport and be prepared to show the purchased goods to Planet Tax Free staff at the airport before checking in for the flight.
  • High value purchases such as watches or jewellery or smartphones may need to be verified again after security and before boarding.
  • The refund will be applied to either a credit or debit card and has no upper limit, but those claiming in cash will be limited to 10,000 dirhams.
  • The refund will be the amount of VAT minus a 15 per cent administration fee and 4.8 dirhams for each tag presented, which will be paid to Planet Tax Free. For example, for goods valued at 2,100 dirhams, of the 100 dirhams charged for VAT, 80.2 dirhams will be refunded to the tourist, with the remainder collected by Planet Tax Free.

The FTA defines a tourist as ‘any national person who is not resident in the state or implementing state and is not a crew member on a flight leaving the United Arab Emirates.’

Goods bought more than 90 days prior to departure from the UAE will not be eligible for a VAT refund.

Byrne declined to reveal Planet Tax Free’s projected revenues for 2019, citing commercial sensitivities, but said: “We have made some projections based on the available information in the public domain with regard to tourism which we see growing on a large scale.

“We have quite a significant investment in the country with regard to capital expenditure, we are investing in quite a lot of marketing within the region. So, we are quite enthusiastic as to how the business will run. We have a lot of hard work to do between now and the end of the year.

“Overall we are very confident and our best people have been working on this for two years with our partners within the FTA. Therefore, we are on target to see where we are. There were some unforeseen costs we have had to bear, but we have done that and we are happy to do that.”

The ‘unforeseen costs’ were related to infrastructure, he said, adding: “We are abiding by the rules in the UAE for data protection for various areas. We have taken these in our stride as part of our business plan, and we are fully committed to delivering on this project.”

Any retailer can register for the tax refund scheme, provided they are registered for VAT, have a tax registration number (TRN) and are up to date with tax returns. The FTA can terminate their participation should they fail to submit regular tax returns.

Byrne said there were between 30,000 and 40,000 businesses registered for VAT in the UAE, but not all would be eligible, such as hotels and restaurants that do not fall into the category of supplying goods for export.

(Reporting by Imogen Lillywhite; Editing by Michael Fahy)

(Imogen.lillywhite@refinitiv.com)

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© ZAWYA 2018

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