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VAT Refunds

What is refund?

The amount that has been paid and that the Authority can refund in whole or in part to the Taxpayer pursuant to the relevant Tax Law require to use for the payment of amounts due or Administrative Penalties or require to carry forward to future Tax Periods depending on the nature of the refund, according to the Tax Law REFUND concept arises where the Vat paid on inward supply exceeds the vat paid on outward supply.

REFUNDABLE TAX arises in the following cases:

Where the amount has been paid and that the authority:

  • Can refund it in whole or part to taxpayers.
  • Require it to use for the payment of amounts due or Administrative penalties
  • Require it to be carried forward to future tax periods depending upon its nature
Can a person claim a refund on zero-rated supplies?

Zero-rated supplies comprise of supplies made by the taxable person is not subject to pay tax but he’s entitled to recover input tax paid. As no output tax is payable or the output tax is lesser than recoverable input tax, the taxpayer is allowed to get the refund of excess recoverable input tax, thus eliminates the cascading effect of the tax

Can a person claim a refund on exempted supplies?

A person who is making exempted supplies is not required to charge the tax but at the same time, he’s not entitled to claim the input tax paid, thus he cannot claim a refund on input tax paid.

What’s the time period for claiming a refund of input tax paid?

Input tax refund can be claimed only on the amount paid or intended to be paid before the expiry of 6 months after the agreed date for the payment of the supply.

Can unregistered person claim refund?

No, only registered persons can claim a refund.

How much can the refund be rounded off to?

Refund can be rounded off to nearest “Dhirams” or the local equivalent.

How quickly will refunds be released?

Refunds will be made after the government receives the application from the taxpayer and subject it to verification checks, with a particular focus on avoiding fraud.

Under which conditions will businesses be allowed to claim VAT incurred on expenses?

VAT on expenses that were incurred by a business can be deducted in the following circumstances:

  • The business must be a taxable person (the end consumer cannot claim any input tax refund).
  • VAT should have been charged correctly (i.e. unduly charged VAT is not recoverable).
  • The business must hold documentation showing the VAT paid (e.g. valid tax invoice).
  • The goods or services acquired are used or intended to be used for making taxable supplies.
  • VAT input tax refund can be claimed only on the amount paid or intended to be paid before the expiration of 6 months after the agreed date for the payment of the supply.
How will Government Entities be treated for VAT purposes?

Supplies made by government entities will typically be subject to VAT. This will ensure that government entities are not unfairly advantaged as compared to private businesses.Certain supplies made by government entities will, however, be excluded from the scope of VAT if they are not in competition with the private sector or where the entity is the sole provider of such supplies. It is likely certain government entities will be entitled to VAT refunds – this is designed to avoid budgeting issues and provide a level playing field between outsourced and insourced activities. For the supplies provided for government entities, the treatment of such supplies shall depend on the same supply and not on the recipient of the supply. Therefore, if the supply is subject to the standard tax rate, the treatment would remain the same even if it is provided to a government entity.

Can businesses offset customs duty against VAT payments?

VAT shall be payable in addition to the customs duties paid by the importer of the goods and cannot be deducted. VAT shall be computed on the value that includes the customs duties.

Can Gulf nationals claim VAT?

A scheme will be introduced to allow a Gulf nationals who are not registered for VAT to reclaim VAT paid on goods and services relating to constructing a new residence which will be privately used by the person and his family. This will allow the recovery of VAT on such expenses as contractor’s services and building materials.

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