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Tourism and e-commerce in the UAE just got a significant boost with the launch of the Federal Tax Authority's (FTA) pioneering VAT refund system for online purchases. This initiative eliminates cumbersome processes, offering a seamless, fully digital refund procedure. Here’s how this game-changing system sets new benchmarks for innovation and customer satisfaction.
Extending VAT Refunds to E-commerce Purchases
Currently, the UAE allows tourist to claim a VAT refund on offline purchase (for further information, see here). In December 2024, the FTA announced the extension of the VAT refund system to e-commerce purchases, making it the first of its kind globally. Tourists can now claim VAT refunds on eligible online purchases during their stay in the UAE. By incorporating fully digital processes, the system ensures seamless submission of travel document details and automatic verification of digital invoices. Refunds are processed swiftly after departure, removing the need for manual intervention or paperwork.
Modus Operandi
The VAT refund process for tourists in the UAE is designed to be fully digital, efficient, and user-friendly. It will be operated in collaboration with Planet, the authorized VAT refund system operator. Let’s understand the process:
1.Initiation - Tourists shop on e-commerce platforms registered with the FTA. At the time of purchase, they provide their travel document details and personal information for verification of eligibility.
2.Verification of Identity - Tourists' eligibility is confirmed during the delivery process or at the fulfillment stage of online orders. This step finalizes their registration in the VAT refund system.
3.Digital Platform Integration - A paperless system enables tourists to scan their passports and complete transactions seamlessly. Purchase details are shared automatically in the form of digital invoices.
4.Invoice Verification - Tourists can verify their invoices via a dedicated shoppers' portal.
5.Refund Processing - Once the tourists leave the UAE, refunds are processed digitally and credited directly to their accounts.
6.Comprehensive Coverage - Refunds are applicable to purchases made from both traditional stores and registered e-commerce platforms. This ensures tourists can recover refundable VAT for all eligible purchases made during their stay.
This digital-first approach enhances the shopping experience for tourists, making VAT refunds quick, simple, and entirely paperless.
Boosting Tourism and E-Commerce
This initiative demonstrates the UAE's commitment to innovation, aligning with its vision to become a global leader in tourism and digital transformation. Tourists can now shop online and enjoy the convenience of VAT refunds without worrying about lengthy procedures. For businesses, the system provides new opportunities to attract international customers and establish trust by ensuring compliance with the FTA regulations.
Conclusion
Though VAT is levied in the UAE at a nominal rate, tourists coming to the UAE must take advantage of this benefit while shopping. On the other hand, if you’re an e-commerce business or a retailer in the UAE, you must consider registering with the FTA to offer VAT refunds and gain more online business.
Disclaimer: Content posted is for informational and knowledge sharing purposes only, and is not intended to be a substitute for professional advice related to tax, finance or accounting. The view/interpretation of the publisher is based on the available Law, guidelines and information. Each reader should take due professional care before you act after reading the contents of that article/post. No warranty whatsoever is made that any of the articles are accurate and is not intended to provide, and should not be relied on for tax or accounting advice
