The UAE generally allows for the deduction of input VAT to offset output VAT for non-resident taxpayers. When input VAT exceeds output VAT in a given period, the excess may be carried forward to offset future output VAT payable, or a request for refund may be made.
A foreign business is eligible to apply for a VAT refund, if the following conditions are met:
- It does not have a place of establishment or fixed establishment in the UAE or another Gulf Cooperation Council (GCC) implementing state;
- It is not a taxable person in the UAE;
- It is not carrying on business in the UAE; and
- It is carrying on a business and is registered as an establishment with a competent authority in the jurisdiction in which it is established.
However, a VAT refund is not available if:
- The foreign business makes supplies in the UAE (unless the recipient is obliged to account for VAT under the reverse charge mechanism);
- The input VAT incurred on the goods or services is non-recoverable by a taxable person according to the UAE VAT legislation, e.g., entertainment and motor vehicles available for personal use;
- The foreign business is from a country that does not in similar circumstances provide VAT refunds to UAE entities. However, this restriction does not apply for businesses resident in any GCC Member State that is not considered to be an implementing state; or
- The foreign business is a non-resident tour operator.
Refunds can be claimed by a foreign business from the approved list of countries having reciprocal agreements with UAE in respect of a calendar year period, provided the refund amount is at least AED 2,000. It is clarified that foreign businesses are entitled to a VAT refund in respect of expenses incurred on or after the effective date of the reciprocal agreement with the UAE.
Refund applications for a particular period (which is generally a calendar year) can be made from 1 March of the following year (i.e. for the period 1 January 2020 to 31 December 2020, applications are accepted from 1 March 2021). The last day for submission of refund claims is 31 August of each year.