VAT Refunds – Improving Your Probability Of Success
March 22, 2021 / Haroon Juma / VAT & Tax Blogs
During the course of submitting your VAT returns, your business may be in a VAT refund position which enables you to claim a refund from the Federal Tax Authority.
VAT refunds are not automatically granted, The UAE Federal Law No. 7 of 2017 on Tax Procedures details the requirements to proceed with a claim. Your businesses may face challenges in understanding the procedural requirements which could jeopardise or delay a successful claim, in this blog we share a summary of the typical areas that must be addressed.
Are Refund Claims Mandatory?
The short answer is no. If you have a net amount due in the declared VAT return, you are not obliged to mandatorily elect a refund.
- The amount can be waived and not claimed
- or left as a balance on the VAT account to be used against future liabilities.
If your business expects a future VAT liability it is probably more efficient to offset the balance against a future payment due.
If your business wishes to proceed with a refund claim from the FTA, this is subject to a formal process under the VAT refund application Form VAT311 available in the FTA portal. This process is rigorous and requires credible transactional analysis and evidence to assure the basis of the claim meets the FTA’s satisfaction.
1. Assure Accuracy & Supporting Documentation
The FTA claims process is designed to verify the credibility and reliability of your VAT returns. Therefore, supporting transactional VAT calculations must be correctly submitted and in compliance to the Legislation rating your supplies and any VAT recoveries on purchases accurately.
The nature of your business will dictate the specific risk areas prone to VAT calculations, nevertheless below list provides a few examples to help your business:
- Expenses that could be of personal nature
- VAT subject to blocked adjustments
- Exempt supplies and basis input VAT claims
- Errors in Goods imported reverse charge claims
- Determination of export of goods and services
- Determination of Out of Scope supplies
These transactions are more likely to be reviewed under the refund claim and any errors could lead to a technical basis to disallow the claim. Any purchase transaction where you have recovered will require the correct Tax Invoice documentation with your company information including TRN to assure the expense was incurred in the course of making supplies.
Preparation of file
The claims process is subject to the disclosure of transactions (full or sample subject to FTA discretion) relevant to the tax period in the VAT 311 form format which seeks to list vendor/customer, supply or purchase type and financial amounts.
Ideally your accounting system should provide the transactional reporting with segregation to the tax treatment or code to minimise the preparation of the VAT refunds application Form VAT311. Your platform’s adherence to the FTA audit file specification can significantly reduce the time and accuracy in preparing the required transactional information.
If your business is in a regular refund position, upgrading to an FTA certified or flexible data exporting platform will be essential to minimise the preparation of the FTA file. Any errors in the file or supporting documents that cannot be correlated to provided could increase risks in submitting a successful claim.
Timeframe & Responsiveness
Once the claim for a refund of excess refundable tax is made, the FTA can take at least 20 business days after the application is submitted to respond to the request. You may be asked to present additional information or clarification.
The degree of responsiveness and completeness of information to any request is paramount to form a credible claim. Following the FTA review, you will be informed whether the refund claims have been accepted or rejected based on the application and details. Thereafter processing the refund payments are subject to the FTA due processes for approvals dependent on the amount under question.
If your business requires assistance to verify and support the refund claims process, we have assisted many businesses to assure the completeness and preparation of their submissions as an approved FTA Tax Agency.
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