The UAE Cabinet's endorsement of value added tax (VAT) refund for tourists from the fourth quarter is expected to drive growth in the tourism and hospitality sectors, experts and executives say.
The VAT refund will be an additional boost to the country's new strategy to cash in on transit tourism. Out of 50 million transit passengers who went through Dubai airports in 2017, only four million came out of the airport. VAT refund is expected to magnatise the hitherto dormant transit tourism sector.
Non-resident visitors can avail VAT refund on purchases made at participating retailers, provided such goods are not exempt from the tax system, through designated refund outlets, according to a press statement on Wednesday.
The VAT refund system will integrate retail outlets with tax refund points in line with the government's efforts to achieve efficient implementation of the tax system in the UAE, it added.
"The system will be implemented beginning the fourth quarter of 2018 in cooperation with an international specialised company in tax recovery services," the statement said.
Tourism, which contributed 11.3 per cent to the UAE's gross domestic product in 2017, has been passing through challenging times since the UAE introduced the consumption tax in January this year with stakeholders such as hotels, retail and entertainment outlets reporting a slowdown in business.
Latest data from Dubai Tourism also indicated that the emirate welcomed 7.16 million international guests during the first five months of 2018, compared to 7.26 million arrivals in the same period last year, reflecting a slight decline of 1.38 per cent.
Tourism is one of the main pillars of the economy and contributed Dh154.1 billion to the GDP last year. The latest move by the government will give the much-needed impetus to the sector and help attract more tourists, experts said.
Saif Saeed Ghobash, undersecretary, Department of Culture and Tourism - Abu Dhabi, said this new directive in is line with the UAE's efforts to implement an efficient tax system in the Emirates, and will directly support the growth of the tourism sector.
"The UAE in general, and Abu Dhabi specifically, will now have this added significant attraction to all types of tourists and business travellers, reinforcing the emirate's position as a 'go-to' destination and further boosting potential visitor numbers," he said.
Sultan Al Mutawa Al Dhaheri, executive director for tourism sector, Department of Culture and Tourism - Abu Dhabi, said VAT refund is a great news for visitors planning a trip to explore the emirate.
"Tourists and visitors will be encouraged to stay in Abu Dhabi for longer periods, enjoy more tourist experiences and benefit from attractive offers with a wide choice and competitive prices."
Firoz Merchant, philanthropist, founder and chairman, Pure Gold Group, said this move will attract more tourists and bolster the retail business and industry, thereby driving the growth of the economy.
"The announcement is a reflection of the visionary leadership's efforts that showcase the UAE as the ultimate luxury retail destination," he said.
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