FTA introduces new VAT refund scheme for online shopping in the UAE

The FTA's move is described as a world first for enhancing digital competitiveness in the UAE

A new VAT refund process has been introduced by the UAE for e-commerce purchases made by tourists while in the country. According to reports, this is a world first.

FTA's (Federal Tax Authority) new proactive solutions are aligned with the new system designed in collaboration with Planet, the authorized operator of tourist VAT refunds.

Upon exiting the country, the tourist will receive a refund. To qualify for a refund, you must:

• Before purchases are shipped, tourists in the UAE can apply for VAT refunds directly through e-commerce platforms registered with the Authority.

• The purchaser can verify their eligibility at the time of purchase by providing the details of their travel documents and relevant personal information.

• The VAT refund registration process is completed once the tourist's identity has been verified during delivery or order fulfillment online.

"We are proud of the success of the Federal Tax Authority in launching the world’s first electronic system that enables tourists to recover VAT on their e-commerce purchases during their stay in the UAE," said said Khalid Ali Al Bustani, Director General of the Federal Tax Authority. "This is part of the Authority’s ongoing efforts to develop its systems and provide innovative services that set global benchmarks.”

Tourists can already receive full VAT refunds in the UAE on all purchases they make in physical stores. Incentives are also being offered for online shopping by tourists.

The benefits to the local e-shopping marketplace will be 'immense', say local ecommerce industry sources. "There could be many products and categories online that will benefit from zero VAT for visitors to the UAE," said an online retailer. "The biggest gains will be felt in demand for higher priced categories bought online by tourists."

The VAT rate in the UAE, which went into effect January 2018, is 5%.

Planned actions under the UAE's FTA

For tourists who make purchases via e-commerce during their stay in the UAE, the FTA has developed a plan to include marketplaces and e-commerce retailers registered with the Authority.

Plans for increasing UAE's competitiveness in providing services are based on 'creativity to meet future demands'.

"This significant achievement contributes to improving the country’s digital competitiveness and innovation performance indicators globally, supporting the UAE’s leadership in all sectors, including tourism and e-commerce," said a statement.

VAT refund for tourists

Tourists in the UAE began receiving VAT refunds more than two years ago. The system is completely paperless. Tourists are reclaiming VAT on their physical store purchases as follows: 

• The process is as simple as scanning passports, making purchases, and sharing digital invoices.

• As well as verifying their invoices, tourists can also facilitate VAT refunds through the shoppers' portal, ensuring a seamless shopping experience.

"It allows tourists to recover refundable VAT on all their purchases during their stay in the UAE, whether from traditional stores or e-commerce platforms registered with the Authority," said Al Bustani. "The VAT refund procedures are processed smoothly, quickly, and efficiently, from the moment of purchase until the refund is completed when the tourist departs the country."

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