Simplify Your UAE VAT Refund Process with Experts

Value Added Tax which is implemented in UAE with effect from 01 January 2018 allows the taxable person to get the refund from Federal Tax Authority based on their eligibility. The VAT refund application requires a lot of detailed attention in order to avoid rejection from the authority. Strong supportive documents and details are required in order to process the smooth refund application. Any missing documents or details can either delay the refund process or be rejected by the tax authority.

In this article, let us understand in detail, the common challenges which are faced by UAE businesses, and how an experienced tax agency can be involved in the VAT refund application and expedite the refund process.

1. What is a VAT Refund?

A taxable person is eligible for a VAT refund if the VAT paid on expenses/ purchases is higher than the VAT collected on sales.

Several scenarios for better understanding are listed below:-

• When a taxable person sells goods or services that are 0% rated (e.g.:- Exports).
• When a taxable person purchases expensive equipment or investments.
• When the expenses of a taxable person exceed the revenue generated can also result in a VAT refund.

The taxable person can still claim back the excess paid VAT from the federal tax authority (FTA). This refund will be subjected to a thorough review and approval process.

2. Steps in the VAT Refund Process

Step 1: Filing a VAT Return

The VAT return filing is the most important and beginning step in the VAT refund process. As per the federal tax authority majority of the taxable person who is VAT registered based on the mandatory/voluntary threshold should file the VAT return every quarter without fail to avoid penalty.

Step 2: Submitting the Refund Application

After the VAT return filing the taxable person should file a VAT refund application alternatively. The following details are required when preparing a VAT refund submission:

• Bank account details for the refund settlement.
• Supporting documents such as invoices, contracts, and proof of payment need to be submitted.

Step 3: FTA Review and Approval

The federal tax authority reviews the application submitted to identify the authenticity and accuracy and if in are any doubts they may also ask for additional information/valid documentation

Step 4: Refund Issuance

The federal tax authority approves the amount post-validation and will credit the excess paid VAT to the specified bank account in the application.

3. Common Challenges in Claiming VAT Refunds

a) Incomplete or Incorrect Documentation

The correct and complete documentation is mandatory for the refund process. Missing or incorrect documents such as invalid tax invoices or incomplete income proof can lead to delay or rejection.

b) Errors in VAT Return Filing

Errors in VAT return filing, such as incorrect reporting of input or output tax, can also complicate the refund application.

c) Delays in Refund Processing

If there is any delay in providing input to FTA’s additional clarification. There might be a delay or rejection of tax refund from FTA.

4. How does a VAT Tax Agency Simplify the Refund Process?

Here’s how the clients can benefit from the support of a registered VAT tax agent for the VAT refund process.

a) Ensures Accurate VAT Return Filing

In the tax agency, the tax agents will be doing the VAT filings and VAT refund processes and these agents are qualified by FTA also listed in the FTA portal which means they are authorized to do the filings and refund process following the guidelines of FTA.

b) Prepares Comprehensive Documentation

Same as filing all the documents, tax invoices, and payment records will be validated and reconciled thoroughly to ensure there will be no duplication and follow FTA standards.

c) Handles FTA Queries Professionally

There is a possibility to make a tax agent act on behalf of any taxable person by linking the FTA-approved tax agent to the taxable person's FTA portal. This link will help to provide prompt and accurate responses.

d) Monitors Refund Application Status

The tax agency will take care of the refund application ensuring the delivery of any additional requirement from FTA on time.

e) Provides Expert Advice on Eligibility

The tax agency will evaluate and make clients understand whether the particular client's activities are eligible for tax refunds. If eligible then will help them in processing the refund as per FTA standards and reduce the risk of rejection.

5. Benefits of Partnering with a VAT Tax Agency

a) Saves Time and Resources

If any company has appointed a tax agent to take care of their tax refund work then they can sit back and focus on the company's growth rather than investing time again in tax refund activities because this process can be time-consuming and also require a lot of attention to details which a tax agency will not compromise.

b) Minimizes Errors and Delays

The tax agency consists of an FTA-certified tax agent whose main focus will be on VAT return filings and preparation of refund applications. This expertise can lower the risk of huge Errors and delays.

c) Improves Cash Flow

There are organizations whose tax refund will be millions or billions, and for those clients’ timely refunds will be beneficial for the smooth operation which significantly enhances cash flow.

d) Provides Peace of Mind

When a tax agency manages the refund process, the clients can focus on the company’s growth plans ensuring that their claims are handled by dedicated professionals following compliance and regulations.

6. Real-Life Scenario: How a VAT Tax Agency Helped Secure a Refund

In UAE a manufacturing business incurred excess input VAT for the export of raw materials and there was a delay in the initial refund application due to missing documentation and FTA queries.

Solution:

Any business after appointing a VAT TAX AGENCY will get the following benefits:-

All their VAT return filings will be reviewed and corrected.

Supporting documents will be prepared completely without any missing.

Tax agents become mediators with FTA to address queries on time.

Outcome:

The outcome was refund approved within weeks due to which cash flow has improved. The main impact was on following the compliance recommended by the FTA.

7. Why Choose Flying Colour Tax Consultant LLC for VAT Refund Assistance?

At Flying Colour Tax Consultant LLC, Our primary area of functioning is in simplifying VAT compliance and refund processes for businesses in the UAE.

Our VAT refund services include:

• Precise filing: - We will ensure the VAT return and refund application are precise which means error-free.
• Compliance documentation assistance: - Arranging, organizing and validating all the essential documents.
• Representing FTA: - on behalf of a client we as a tax agent will be present in FTA to clear all the queries and communication.
• Professional advice: The client can avail of an advisory on refund eligibility and the compliance that needs to be followed to avoid rejection.

With our knowledge and experience gained over the past 20 years in the UAE market, you can safely secure VAT refunds efficiently and also without much hassle.

Conclusion

In UAE any businesses registered for VAT will only be eligible for a VAT refund but every business will also not be eligible for the VAT refund, for eligibility, the businesses paid VAT on expenses/ purchases are higher than the VAT collected on sales in such condition the business can claim VAT refund and also there is no specific timeline or particular amount for collecting VAT refund it totally depends on the business management.

The VAT refund can be considered as an essential healthy cash flow for businesses in the UAE. This process needs to be done by professionals to avoid rejections or delays in refunds. Assigning a tax agency can ensure that the filings, and refund applications are submitted accurately. This will result in minimizing delay and maximizing approval.

At Flying Colour Tax Consultant LLC, we are committed to helping businesses optimize their VAT compliance and refund processes. Contact us today to learn how we can support your VAT refund needs and ensure smooth, hassle-free operations.

To learn more about VAT Refunds in the UAE: How a Tax Agency Ensures a Smooth Process, book a free consultation with one of the Flyingcolour team advisors.

Disclaimer: The information provided in this blog is based on our understanding of current tax laws and regulations. It is intended for general informational purposes only and does not constitute professional tax advice, consultation, or representation. The author and publisher are not responsible for any errors or omissions, or for any actions taken based on the information contained in this blog.