The UAE will now offer value-added tax (VAT) refunds for e-commerce purchases made by tourists during their stay in the country. This initiative, announced by the Ministry of Finance’s Federal Tax Authority (FTA), aims to enhance the UAE’s position as a leading tourism and e-commerce hub.
How the VAT Refund System Works
Under the new system, tourists can request VAT refunds directly through registered e-commerce platforms. They need to provide their travel document details at the time of purchase. The FTA will verify eligibility when the order is fulfilled or delivered. Khalid Al Bustani, FTA Director General, emphasized that this system streamlines the process from purchase to refund, ensuring a hassle-free experience for tourists.
Benefits of the Initiative
This VAT refund system builds on previous efforts to digitize tax processes in the UAE. Tourists can now recover VAT on both traditional and online purchases, reinforcing the country’s commitment to digital transformation. The initiative also aligns with the UAE’s broader goal of diversifying its economy and enhancing competitiveness in various sectors.
Background on VAT in the UAE
The UAE implemented a 5% VAT on most goods and services in January 2018 as part of its economic diversification strategy. The VAT refund scheme for tourists has been in place since November 2018, allowing visitors to claim refunds on purchases over Dh250 ($68) at designated outlets before leaving the country.
Future Tax Reforms
The introduction of this VAT refund system is part of a larger shift in the UAE’s tax landscape. Recent reforms include a federal corporate tax at a standard rate of 9% effective June 1, 2023, and plans for additional incentives to boost innovation and attract talent.This new initiative is expected to significantly benefit the local e-commerce market and enhance the overall tourist experience in the UAE.
