The VAT Tourist Refund Scheme for UAE Retailers: A Complete Guide
The UAE has long been synonymous with world-class shopping, attracting millions of international visitors annually to its luxurious malls and bustling souks. To further enhance this appeal and maintain a competitive edge on the global stage, the UAE government introduced the VAT Tourist Refund Scheme. This initiative is more than just a benefit for tourists; it’s a powerful sales tool for retailers, providing a direct incentive for visitors to spend more, knowing they can reclaim the Value Added Tax on their purchases before they leave the country.
- The VAT Tourist Refund Scheme for UAE Retailers: A Complete Guide
- Part 1: Understanding the Scheme's Framework
- Part 2: Retailer Eligibility and How to Join the Scheme
- Part 3: The Retailer's Role - The Point-of-Sale (POS) Procedure
- Part 4: Accounting and VAT Return Filing
- How Excellence Accounting Services (EAS) Empowers Your Retail Business
- Frequently Asked Questions (FAQs) for Retailers
- Maximize Your Tourist Sales. Minimize Your Compliance Risk.
However, participating in the scheme is not a passive activity. It requires retailers to understand their obligations, train their staff, integrate new technology at the point of sale, and adjust their accounting procedures. Failure to manage the process correctly can lead to customer dissatisfaction, compliance breaches, and potential penalties. This comprehensive guide is designed specifically for UAE retailers. It breaks down every aspect of the scheme, from registering as a partner to the step-by-step process at the checkout counter, and the critical accounting and compliance requirements that follow. Mastering this system can transform a regulatory requirement into a significant driver of revenue and customer loyalty.
Key Takeaways for Retailers on the Tourist Refund Scheme
- Partnership with Planet: The scheme is managed by a third-party operator, Planet. Retailers must register with Planet to participate.
- Eligibility is Key: Retailers must correctly identify eligible tourists (non-UAE residents) and eligible goods (most consumer goods, excluding services).
- Point-of-Sale Process: The core retailer responsibility is to generate a “tax-free tag” using Planet’s system at the time of purchase and attach it to the sales receipt.
- Minimum Spend: The scheme applies to purchases where the total value of tax-inclusive products is AED 250 or more.
- Zero-Rated for VAT: Sales processed through the Tourist Refund Scheme are treated as exports and should be reported as zero-rated supplies on the retailer’s VAT return, allowing for full input tax recovery.
- Record-Keeping is Crucial: Retailers must maintain detailed records of all tax-free transactions for a minimum of five years for potential FTA audits.
Part 1: Understanding the Scheme’s Framework
The VAT Tourist Refund Scheme allows overseas tourists who are not residents of the UAE to claim a refund on the 5% VAT they pay on eligible goods purchased from registered retailers. The stated goal is to boost the retail sector and enhance the UAE’s attractiveness as a top-tier global shopping destination.
The Role of the Scheme Operator: Planet
The Federal Tax Authority (FTA) has outsourced the entire administration and operation of the scheme to a specialist third-party company called Planet. Planet acts as the central hub connecting retailers, tourists, and the FTA.
Planet’s key responsibilities include:
- Registering and onboarding eligible retailers.
- Providing the necessary technology (hardware and software) for retailers to issue tax-free tags at the point of sale.
- Operating validation points and refund counters at all major UAE exit points (airports, seaports, and land borders).
- Validating the export of goods and processing the refund to the tourist.
- Collecting the VAT back from the retailer (which the retailer originally collected from the tourist) and remitting the correct net amount to the FTA after deducting the refund and their fees.
For retailers, all day-to-day operational aspects of the scheme are managed through their partnership with Planet.
Part 2: Retailer Eligibility and How to Join the Scheme
Not every retailer can automatically offer tax-free shopping. There is a formal registration process and a set of eligibility criteria that must be met.
Who Can Register?
- Must be VAT Registered: The retailer must have a valid Tax Registration Number (TRN) with the FTA.
- Must Sell Eligible Goods: The retailer’s primary business must be the sale of goods that are not on the scheme’s exclusion list.
- Good Standing with the FTA: The retailer should have a good record of tax compliance, including timely VAT return filing and payments.
The Registration Process with Planet
The process to become a participating retailer involves applying directly to Planet. While the specifics can be obtained from Planet, the typical steps are:
- Application Submission: The retailer submits an application form along with required legal documents (e.g., Trade License, VAT Registration Certificate).
- Vetting and Approval: Planet reviews the application to ensure the retailer meets all the necessary criteria.
- System Integration and Training: Once approved, Planet provides the retailer with the necessary POS device or software integration. They also provide mandatory training for staff on how to operate the system and handle the process.
- Go-Live: Once training is complete and systems are tested, the retailer can begin offering the service to tourists.
Part 3: The Retailer’s Role – The Point-of-Sale (POS) Procedure
The retailer’s main responsibility lies in correctly executing the tax-free transaction at the checkout. This is a multi-step process that staff must be thoroughly trained on.
Step 1: Identify an Eligible Tourist
The first step is to confirm the customer is an “overseas tourist.” An eligible tourist is anyone who is not a resident of the UAE. This includes tourists on visitor visas and GCC nationals who are not UAE residents. Crew members of flights or ships leaving the UAE are not eligible.
- Verification: Staff must ask for the tourist’s original passport (or GCC national ID). Photocopies are not accepted.
Step 2: Confirm the Purchase is Eligible
The scheme applies to goods, not services. The goods must also not have been consumed (fully or partly) in the UAE.
| Eligible Goods (Examples) | Ineligible Goods & Services |
|---|---|
| Electronics, clothing, watches, jewelry | Hotel stays, restaurant meals, car rentals |
| Souvenirs, perfumes, cosmetics | Goods that have been consumed in the UAE |
| Packaged food and beverages | Motor vehicles, boats, and aircraft |
Step 3: Meet the Minimum Spend Requirement
A single tax invoice must have a total value of at least AED 250. Tourists cannot combine multiple smaller invoices to reach this threshold.
Step 4: Generate the Tax-Free Tag
This is the most critical technical step. Using the Planet device/system:
- Scan the Tourist’s Passport: This captures the tourist’s details digitally.
- Scan the Retailer’s Tax Invoice: The system captures the purchase details, including the VAT amount.
- Issue the Tag: The system generates a unique, barcoded sticker—the tax-free tag.
- Attach the Tag: Staff must firmly attach this tag to the back of the printed sales receipt.
The retailer then hands the receipt with the attached tag to the tourist and briefly explains the next steps for validation at the airport.
Part 4: Accounting and VAT Return Filing
Properly accounting for sales made under the scheme is essential for compliance. Mistreating these sales can lead to significant errors in your VAT return.
How to Treat Tourist Scheme Sales
A sale to a tourist that is successfully processed through the Planet system is considered an export of goods for VAT purposes. This means it is a zero-rated supply.
- Invoice: The initial invoice issued to the tourist must show 5% VAT, as you are collecting the tax at the point of sale.
- VAT Return: In your VAT return for the period, you will report these sales in the box for zero-rated supplies (e.g., Box 2 of the VAT201 form). You do not declare the VAT collected on these sales as output tax payable to the FTA.
- Reconciliation: Planet will later collect the VAT amount from you. The process ensures that the net effect is a zero-rated sale from your perspective.
This treatment allows you to continue recovering all the input VAT related to your business, as zero-rated supplies are still “taxable supplies.” An expert internal audit can help verify that these procedures are being followed correctly.
The Importance of a Modern Accounting System
Manually tracking these sales can be a nightmare. Using a cloud accounting platform like Zoho Books is a game-changer for retailers. You can create a specific sales account for “Tourist Refund Scheme Sales” and assign it a zero-rated tax treatment. When your staff records a sale, they simply choose the correct account, and the system automatically handles the correct VAT reporting, making your financial reporting accurate and stress-free.
How Excellence Accounting Services (EAS) Empowers Your Retail Business
Navigating the Tourist Refund Scheme requires procedural and financial precision. EAS offers specialized services to help retailers maximize the benefits of the scheme while ensuring full compliance.
- Scheme Registration and Onboarding: We assist retailers with the application and registration process with Planet, ensuring a smooth start.
- Staff Training and Process Implementation: Our HR consultancy wing can help develop training materials and procedures for your POS staff to minimize errors.
- Retail Accounting and Bookkeeping: We provide specialized accounting and bookkeeping services tailored for the retail sector, correctly categorizing and recording tourist scheme sales.
- VAT Return Filing Services: We ensure your VAT returns are filed accurately, reflecting tax-free sales as zero-rated supplies and maximizing your input tax recovery.
- System Integration Advisory: Our experts can advise on configuring your accounting systems, like Zoho Books, to automate the tracking and reporting of these transactions. A proper accounting system implementation is key.
Frequently Asked Questions (FAQs) for Retailers
The tourist receives 85% of the total VAT amount paid, less a fixed fee of AED 4.80 per tax-free tag. The remaining 15% is retained by Planet as their administration fee.
No. The minimum spend of AED 250 must be on a single tax invoice from one registered retail store.
If the tourist has already left the store, it is unfortunately too late. The tag must be generated at the time of purchase. In this scenario, the sale must be treated as a standard 5% VAT sale, and you must remit the VAT to the FTA. This highlights the importance of staff training.
No. The scheme is strictly for “overseas tourists.” A UAE resident, regardless of their nationality or destination, is not eligible to claim a refund.
The tourist must get their tax-free tag validated and export the goods from the UAE within 90 days from the date of purchase shown on the invoice.
If you process a sale as tax-free for an ineligible person, the FTA may deem it a standard-rated sale. You would then be liable for the 5% VAT that should have been remitted, and you could also face penalties for incorrect VAT reporting.
Yes. Planet provides a dedicated terminal or software that integrates with your existing POS system. This device is used to scan the documents and generate the tax-free tag. Planet will advise on the best technical solution for your store.
Generally, no. The scheme is designed for goods purchased in-store where the tourist is physically present to show their passport. Online purchases delivered to a UAE address do not typically qualify.
You must have a clear policy for this. If a product is returned, you must cancel the original tax-free tag in the Planet system. If an exchange occurs, the original tag must be cancelled and a new one issued if the new purchase value still meets the criteria.
The revenue from these sales is still part of your business’s total income, which is subject to UAE Corporate Tax. Accurate bookkeeping for VAT, including for this scheme, provides the clean, reliable data needed to calculate your Corporate Tax obligations correctly.
Conclusion: Turning Compliance into a Competitive Advantage
The UAE’s VAT Tourist Refund Scheme is a strategic initiative that directly benefits the retail sector. While it introduces new procedural and compliance responsibilities, the potential return on investment is significant. By embracing the scheme, training staff effectively, and integrating robust systems, retailers can enhance the shopping experience for international visitors, drive higher sales, and reinforce their position in a competitive global market. Viewing the scheme not as a burden, but as a government-endorsed sales tool, is the key to unlocking its full potential.
