In the United Arab Emirates, there are two taxes on goods and services: Value Added Tax (VAT) and excise duty.
VAT
The prevailing rate of VAT in the country happens to be 5%. But, some items are kept away from the purview of the VAT. In the year 2020, the UAE excluded certain personal protective gear used in the COVID-19 pandemic, such as medical and textile masks, single-use gloves, chemical disinfectants, and antiseptics from the ambit of VAT.
The goods and services that carry a 0% VAT rate apart from the above-mentioned include:
- Exports and goods and services outside the GCC
- Global transportation
- Investment-grade precious metals
- Newly built residential properties
- Certain education and healthcare services
Excise tax
The UAE regime brought in an excise tax at the start of 2017. This happens to be an indirect tax charged on goods that the government deems adverse to human health or the environment. Goods falling under the category are:
50% on carbonated drinks (except for unflavored carbonated water). It might be even applicable to items that can be the basis of a carbonated beverage.
100% on energy drinks with stimulating substances including caffeine, taurine, ginseng, and guarana. It may also apply to items that can be the basis of an energy drink.
100% on tobacco and tobacco products to include all items listed within Schedule 24 of the GCC Common Customs Tariff.
Refunds of VAT in the UAE
Tourists, expats and residents are required to pay VAT during the moment of sale. From November 2018 onwards, certain tourists could seek refunds on goods purchased with VAT. For that, these conditions need to be fulfilled:
- Goods have to be bought from a retailer participating in the Tax Refund for Tourists Scheme.
- Goods that are not exempted from the Refund Scheme of the Federal Tax Authority.
- There must be an intention of leaving the USE within 90 days of supply along with the purchases.
- They must export the goods from UAE within three months of supply.
- The procedure of purchase and export of goods has to be performed as per the requirements and procedures fixed by the Federal Tax Authority
Tourists can get refunds via special equipment seen at airports, seaports, and border ports. The devices help consumers to electronically present the tax invoices for their purchases from the outlets registered in the Refund Scheme, along with copies of their passports and credit card.
