The Value Added Tax or VAT was introduced and officially imposed in the UAE on the 1st of January 2018. According to this new taxation system, a value-added tax of 5% was imposed on all goods and services of the UAE at all levels of purchase or sale. However, in an Executive Regulation of the Federal Law, there have been amendments in the taxation of UAE nationals who are building new residences in the UAE. By this amendment, UAE nationals can now file for a VAT refund by providing details of their project.
This article will outline the procedures and documents required to file for a tax refund.
Introduction
Under the new amendment, UAE nationals holding an Emirates ID and Family book can now request a tax refund on the construction of a residential building intended for personal use. The process operates through an online service where applicants fill in their details along with required documents and wait for approval from the Verification Body. Upon approval from the Verification Body, documents review is done and finally, the FTA approves amends or rejects the refund request.
It is important to note that several residential projects initiated by the nationals are on a rental basis for expatriates. The Residential VAT refund does not apply to such projects. The residential project must be for personal use only and include fittings and fixtures that cover the refund policies.
Eligibility Criteria
There are certain criteria to a residence that must be met in order to be eligible for a refund request.
The refund applies to “residence” only
This means that the construction must include a kitchen/cooking area, bathrooms and bedrooms. Any play area, lawn or patio, extension or similar constructions do not classify as a residence and therefore are not eligible for request. However, an extension construction having a cooking facility, bedrooms and bathroom is eligible for a refund. It is to be noted that another floor under construction on top of the existing building meeting all fixture requirements will still not be eligible for refund requests.
The applicant must be a UAE national
Expatriates are not eligible for this facility. UAE nationals holding a valid Emirates ID and a Family Book containing information of all family members is a prerequisite.
The Construction must be a new project
The policy does not cover previously constructed residences. Only new ones under construction are eligible for request.
The type of services rendered matter when applying for request
The VAT refund applies only to certain services in the process of construction. The FTA approves refund requests if:
- The expense is related to building materials such as cement, bricks and more. Furniture and electrical appliances are not included in the services.
- The expense has been paid to construction-related services such as an architectural plan, engineering services, construction labor and more.
- Transportation of goods and materials is involved but only in cases where it has direct link to the construction.
- Installation of certain goods is done in the building. These include:
- Air conditioning systems
- Door
- Fire alarms
- Smoke detectors
- Flooring materials such as tiles or marbles etc.
- Kitchen fittings and fixtures such as counters, cupboards and cabinets
- Sanitary fittings and shower units
- Wiring
- Windows and glazing
Other installations such as pols, landscaping features, furniture items and other removable appliances or fixtures are not included for refund.
Request Processing
Once you are sure that your project meets the eligibility requirements for the VAT refund, you can successfully submit an application by completing the necessary documentation and associated details. This encompasses several aspects and details that need to be followed.
Time of application
Application has to be submitted within 12 months of completion of construction. However, there are certain cases or events that may prevent the applicant to submit their application within the prescribed time limit. These may include any legal dispute over the construction, the unavailability of the applicant due to illness or absence from military service, or some pending technical work (refurbishments or amendments not included). In such cases, the prescribed period of 12 months begin after the completion of the work. The applicants can mention the reason for the delay in their application along with supporting documents.
Retention Payments
If any are made, they must be mentioned in the application along with receipts and other proofs.
Application Procedure
The application for a VAT refund can be submitted on FTA’s online service.
- Prerequisite
Before you begin, keep the following documents in hand to avoid discomfort or delay in the application process.
- copy Emirates ID
- copy of Family Book
- copy of the property completion certificate and building permit
- copy of property plan
- proof to ownership of plot of land
- copy of the letter/certificate issued and stamped by bank which includes details such as the account holder’s name, bank’s name and the IBAN
- other documentations to support the date the building is occupied
- Sign-up and Login
On the FTA e-service website, create our new user account by clicking on “Sign-up”. If you already have an account for VAT registration, simply sign in. use your email and create a unique password, which includes uppercase, and lowercase letters, numbers and special characters. The CAPTCHA follows to verify you as a person. Set up and answer the security question that follows.
Applicants receive a verification link on their mentioned email to confirm the registration process. Follow the link that takes you to the e-services portal. Click “login” using your email address and set the password.
- New Taxable Person/Special Refund Account
Applicants can create more than one accounts on the e-service portal. Enter your legal name (the one that appears on your Emirates ID) incorrect spellings in both English and Arabic and click “Create Taxable Person/Special Refund”.
In the Taxable person dashboard, click “Special Refund” and then click the “New Residence VAT Refund” tab.
- New Residence VAT Refund Request Form
The form has several steps and sections. The ones marked with an asterisk (*) are mandatory and the form does not proceed to the next section without entering information in these sections.
It is advisable to save your application at every step. You can do this by clicking the “Save ad Draft” tab. If you wish to cancel your application at any point, click “Cancel”.
Fill all sections of the application carefully and with correct information to prevent any unwanted consequences or rejection of the application.
- Review of Request
After reviewing, in events of approval by the verification body, the applicants must submit additional documents. These are
- details of the construction contract
- details of the consultancy agreement
- details of variation orders
- invoices that include returned items and credit notes.
- lump-sum tax invoices and proof of payments by the contractor and the consultant to the owner
- relevant tax invoices and proof of payments by owner
- The full name of the UAE National on whose behalf the expense was made
- Signature and Emirates ID number of the UAE National as acknowledgement that the cost was incurred on his/her behalf
- Full plot number or street address of the new residence.
- Request Status
Once the application has been submitted, applicants can check the status of their applications in their dashboards. Various statuses indicate the current process of the application.
Conclusion
The UAE government regularly introduces laws and amendments to facilitate its citizens. The Refund on Buildings is one such initiative. This not only encourages new constructions but also benefits the owners and associated businesses. In case the applicants find the procedure confusing, they can always reach out to BS Auditing for guidance and assistance.
Feel free to contact us:
• Office # 0641, Tamani Arts Offices, Business Bay, P.O. Box 111390, Dubai, UAE
• +971 4 570 7357
• +971 58 108 5690
• info@bsauditing.com
*all information in this blog is for information purposes only. This is not a legal document and does not cover any legal processes; neither should it be used as such.
