After levying VAT from 1st January 2018,, Dubai has started process of granting VAT refund to tourists from 18th of November. Coincidently after a short family trip at Dubai, I returned back to India on the very same day and this gave me a chance to get the first hand experience of the system. Being a tax consultant myself, the matter was having an added interest for me.
So for all those, who are planning to visit Dubai in near future, I am penning down few points in order to give some practical insights into the tax refund process of Dubai. ( and since I am writing this on the very next day after the process has started, I am getting a feeling that this is probably the very first article published anywhere, basis hands on experience of the VAT refund process in Dubai)
The very first thing about VAT refund one should know is that though you shall be paying VAT on every services used/goods purchased in Dubai, the VAT refund is available only in respect of those goods which you are carrying with yourself outside Dubai. So, for example, on all food items which you have consumed in Dubai, though VAT is paid by you, but no refund is available. (At the airport, I saw a number of people, carrying loads of invoices of hotels/ restaurants and various other payments they made in Dubai. Their travel agent had misguided them that they will get refund for whatever VAT they pay in Dubai, but it is not so)
In fact, to understand the legal position properly, I studied their legal document through which this scheme has been promulgated (Federal Tax Authority Decision No. (2) of 2018 On Tax Refunds for Tourists Scheme) and it says that even if the goods are partly consumed in Dubai, VAT refund is not available. So if you purchase a box of chocolates from Dubai Mall, intended to carry it back to your country but can’t resist your test buds and consume some chocolates from it, you shall be losing the VAT refund for this box.
They may actually verify at the airport that goods for which you are calming VAT refund are accompanying you and these are not even partly consumed in Dubai. On this count, my feeling is that items like jewelry and electronic goods would be easy to claim whereas you may always have some issues with consumable items like perfumes, chocolates etc. (Mind you, actual refund process is to happen at airport when you will always be in a hurry to catch the flight and may not be much in a position to argue with the authorities their)
The next point to know is that simply having a tax invoice shall not make you eligible for refund. For VAT refund, the shopkeeper from whom you have purchased goods, is required to be registered with Dubai VAT. Then when you do your purchase, he needs to submit your name and passport no. on the tax portal (make sure to carry your passport when you go for shopping else your retailer shall not be able to enter the details). After entering your details, he will take printout on a sticker and shall paste that sticker on the back of your tax invoice. Only on the basis of that sticker, which is having a QR code, you will be able to claim VAT refund at airport. If your shopkeeper is simply giving you an invoice and convincing you that since it is tax invoice, you will get refund, he is either not registered for VAT refund process or trying to save himself from hassles of entering all the details of yours. (It happened with me at no less than a big departmental store at Mall of Emirates where they simply handed over me a tax invoice and told me that I will get a VAT refund based on this, which was not to be. It was in fact one nice gentleman who hails from Rajasthan India and is having a well-established jewellery shop at Meena Bazaar who explained me all this process and helped me in getting refund for my subsequent purchases).
The VAT refund is available only for those invoices where the invoice value inclusive of vat is minimum 250 Dirhams. So if your family is purchasing different items from one shop, it is suggestible to finalize all the purchases before going for billing, so that you can you can have one single bill to reach to that 250 Dirhams limit.
They will not give you refund of full amount of VAT paid by you. Only 85% of total tax is going to be refunded and from this also there will be a deduction of AED 4.8 for sticker. So if you have got 3 eligible bills for tax refund, for each bill i.e. for each sticker, 4.8 dirhams shall be deducted from your refund.
The VAT refund process is being handled by company called Planet. At Dubai International Airport Terminal 1, as you enter the departure gate, even before check in area, on the far right hand side of yours, Planet have their tax refund counter. They will be needing your passport and departure flight details which they shall be verifying in their system. It took me around 1 hour to complete the process. Of course it was the very first day and system was having lot many glitches but still I will suggest that you keep sufficient margin of time with yourself so that you can complete this process at airport.
Once the details are verified, Planet people shall be confirming the refund to you. They are giving two options to collect this refund -either you can collect it in cash or you can get it credited in your card account. In case you go for a card credit , you need to give your card number to them which they will be entering in the system ( make sure they enter correct card no., ask the fellow to read the card no. as entered) According to them, you should get a credit in your card a/c in next 4, 5 days. Since I am writing this post on the next day itself, I am not sure as of now within how many days, credit will come in my card account.
If you opt for cash, you will not get it immediately but shall be collecting it inside the terminal after completing your check-in and security formalities. Inside the main terminal building, where you reach through the internal metro, there is a counter of Travelex Money Changers, who are getting the instructions in the system from Planet and accordingly handing over the cash refund sanctioned at the Planet counter earlier. And here lies a very interesting catch in the story.
Though you have paid the tax in AED and refund is also sanctioned at Planet counter in AED, the cash refund Travelex is granting, is not in AED but in any other currency and for this they are using a typical airport conversion rate which is obviously quite low as compared to market rate. For example one of my fellow passenger got a refund in Indian rupees for which conversion rate used was around INR 16.5 per AED whereas market rate on the date was around INR 19.95. So a clear loss of around 17% is there. (From this angle probably my idea of collecting the refund through card credit proved to be a better option since I’ll be able to return my Forex card balance in India to my bank at a better rate.)
So if you happen to be one of those persons who indulged in a shopping spree at Dubai mainly because of price difference of the same item in your home country and in Dubai now you better take into account impact of VAT on your decision. Though they are claiming that you shall be getting full refund of VAT, in reality this “full refund” itself is subject to certain cost/transactional loss .
To conclude, following is a summary of the reasons due to which you may NOT be able to get a VAT refund at Dubai :
All in all, the process is smooth, fully system driven and better then similar schemes of other countries. However, tourists need to make themselves well acquainted with the salient points of the scheme in order to get proper benefit of it.
(Author can be reached at [email protected])