UAE sets VAT refund requirements for Emiratis

The country introduced the tax on January 1

The UAE’s Federal Tax Authority (FTA) has set new requirements for Emiratis to receive a value added tax refund related to construction of a new home.

The FTA said in a Saturday statement to news agency WAM that applicants must be UAE nationals and the monetary cost in question should have gone towards financing the construction of a new residence.

Contractor services must be indispensable to the successful completion of the construction project, including builders, engineers, architects and any other similar services, and the products used must be those typically used by contractors, while excluding furniture and appliances.

In addition, the building must be used exclusively as a residential unit for the applicant and/or their family and the refund can only include the money spent establishing the unit, such as the amount paid as building materials.

Emiratis are encouraged to submit a request for a VAT refund via the FTA website within six months of the completion of the building, which should come before the building is occupied or a completion certificate is issued for the building.

“The Authority has been providing transparent standards, procedures and mechanisms to ensure seamless procedures for citizens looking to recover value added tax incurred on the construction of new residences,” said FTA director general Khalid Ali Al Bustani.

Applying for a refund via the FTA website involves filling in a form and scanning it along with supporting documents including proof of ownership.

The FTA will inform the applicant if they are entitled to a refund within five working days.

They must then have the request verified by a body accredited by the FTA, which will issue a verification report on the recoverable amount to be submitted to the FTA within 15 working days.

Finally, the FTA will then take up to 20 days to process the final request and an extra five working days to refund the recoverable amount.

There are no fees associated with the application but verification bodies will charge for their services.

Emiratis are allocated completed homes or land plots by the government.

The UAE introduced the 5 per cent value added tax on January 1. It applies to most goods and services including groceries, fuel and utility bills.

However, the government has recently opted to refund VAT for a number of industries including events and conferences and wholesale gold, diamonds and precious metals.

This month, an International Monetary Fund (IMF) official told Reuters that the implementation of the tax had gone smoothly and its impact on inflation was expected to ease.

Natalia Tamirisa, who heads the IMF mission to the UAE, said inflation is expected to average 3.5 per cent this year, up from 2.0 per cent last year, but will ultimately settle around 2.5 per cent, Tamirisa predicted.

She said the new tax was expected to lift revenues by 1.5 per cent of gross domestic product in the long run.