When is VAT Refund in UAE available?

VAT Refund in UAE for New Residences

Let us see if VAT Refund in UAE is applicable to Mr Tarek, a UAE National, who is constructing a new home in Dubai. He has a detailed plan for the residence and has appointed multiple contractors to perform their roles. Most of the contractors appointed by Mr Tarek are tax registrants as per UAE VAT Law and issues tax invoices for the payments due to them. Some of the tax invoices received are related to Architectural plans, flooring, kitchen fittings, landscaping, CCTV installation, etc.

We will see different instances on VAT Refund in UAE for new residences and the applicability of VAT Refund in UAE.

Mr Tarek wants to know if he can reclaim such taxes he paid. If eligible, should he register himself with the Federal Tax Authority (FTA)for making such claims?

The Federal Tax Authority (FTA)  has devised a special VAT Refund in UAE scheme applicable only to UAE nationals by which a natural person, being a national of UAE can recover all the input tax which has been paid by him without registering for VAT in UAE.

When is VAT refund in UAE available?

Where a UAE citizen owns or acquires land in the UAE on which the person builds or commissions the construction of his own residence, he shall be entitled to make a claim for VAT refund in UAE to the FTA to repay the VAT on the expenses of constructing the residence. 

Whether all Input Tax on all expenses are claimable?

No, the expenses that are incurred for a new residential building which is solely intended to be used for residential purposes can be claimed back. So, in our example, if Mr Tarek was incurring the expenses for an existing residential building, the Input tax paid on such renovation cannot be claimed back.

Assume, if Mr. Tarek owns a home in Jumeirah where he stays and the new building is constructed at Motor City which he plans to occupy once the work is completed. Whether he can claim the input taxes paid assuming he will occupy the property after its construction?

Yes, the law is very clear that a special VAT refund in UAE scheme is only applicable if the newly constructed building is to be solely used for the purposes of residence of the applicant or his family. So, if the purpose of the building is the occupation of the applicant or his family and not to be used as a let out or hotel, the same is eligible for the special refund scheme.

Mr Tarek has received multiple invoices pertaining to the construction of his new villa. Whether he can claim all of such expenses or is there a limit on such claims?

As per the law, there is no limit/cap on the input tax claims but the law has mandated a limit on the nature of such expenses. The user guide issued by FTA states that:

  1. Services provided by contractors, including the services of builders, architects, engineers, and other similar services necessary for the successful construction of a residence.
  2. Building materials, being goods of a type normally incorporated by builders in a residential building or its site, but not including furniture or electrical appliances.

Goods/materials are normally considered to be incorporated into a building when they are fixed in such a way that the fixing or removal of those goods would either require the use of tools, or result in the need for remedial work to the fabric of the building, or substantial damage to the goods/materials themselves. So, it is clear from the above provisions that VAT Refund in UAE is not applicable in every scenario and not all input tax can be claimed by the special refund scheme but there is a limit on the nature of work undertaken.

A few examples of expenses which are not eligible for VAT Refund in UAE are:
  • Furniture which is not affixed to the building such as sofas, tables, chairs, bedroom furniture, curtains, blinds, carpets
  • Electrical and gas appliances, including cookers
  • Landscaping, such as trees, grass, and plants
  • Free-standing and integrated appliances such as fridges, freezers, dishwashers, microwaves, washing machines, dryers, coffee machines;
  • Audio equipment (including remote controls), built-in speakers, intelligent lighting systems, satellite boxes, free view boxes, CCTV, telephones
  • Electrical components for garage doors and gates (including remote controls)
  • Garden furniture and ornaments and sheds
To obtain VAT Refund in UAE, when should Mr. Tareq submit the claims?

The VAT Refund Form must be sent to the FTA within 6 months from the date of completion of the newly built residence which is the earlier of the date:

  1. the residence becomes occupied; or,
  2. when it is certified as completed by a competent authority in the UAE (per the Building Completion Certificate).
How to submit the VAT Refund in UAE claims?

The VAT Refund form in UAE is available at the FTA’s website which needs to be filled out and you may send to homebuilders@tax.gov.ae along with the copies of the construction contract and consultancy agreement (and any addendums), copies of variation orders, invoices that include returned items and copies of credit notes. Once these details are shared, FTA will contact the applicant within 5 working days to confirm the eligibility. And if required, FTA might ask for additional documentation to support the claims made.

If additional documentation is required, FTA will appoint verification bodies who are third parties appointed with this specific purpose. Such a verification body is appointed by FTA with no charge to the applicant. Once the necessary documentation is submitted to the satisfaction of the verification body appointed, the refund application will be processed within 20 business days from such date. Now, Mr. Tareq can claim the VAT Refund in UAE on all eligible expenses which he incurred on the construction of his new residence.

Emirates Chartered Accountants Group is a Registered Tax Agent with the Federal Tax Authority (FTA) as Emirates International Chartered Accountants Group providing exclusive Tax Agency Service to businesses in the UAE. Our Tax Professionals are highly qualified and well versed with the UAE Tax Law with the practical implementation of VAT in UAE and Bahrain. We understand that every business is different from the other. Hence, each of our services is tailored as per your business needs.

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