Tourism, Consumer Spending and Tax Returns in UAE

 

United Arab Emirates (UAE) is reported to be the second-largest economy in the MENA region with a gross domestic product (GDP) of 434 billion as of 2018. In the past, for example in 2012, oil revenues contributed a third of the GDP or 70 per cent of the country's gross domestic product (GDP). This is, however, is likely to reduce as a result of recent fall oil prices. The fall in oil prices has made the UAE economy to no longer depend on oil revenues for sustained growth. The UAE government has embarked on policies aimed at diversifying its economy, for example, the 10-year visa for private investors, designed to encourage private investment and attract a wider range of economic activities.

Non–oil revenues are expected to propel and accelerate economic growth in UAE in response to the government's newly introduced policies. Oxford Economics is forecasting non-oil GDP growth of 3.6 per cent in 2019, up from 3 per cent the previous year[1]. By 2015 sectors such as the media, tourism and other non-traditional revenue earners increased to 70 percent of the UAE's GDP. The travel and tourism sector in 2015 directly contributed USD 18.7 billion which is equivalent to 5.2 per cent of the total GDP, and with the diversification policies, the economy is expected to grow at higher levels. It is estimated that by 2021, international tourists will spend $43.8 billion (Dh160 billion) on bags, shoes, jewellery, and other items at retail shops across Dubai[2], making the city one of the world’s top shopping destinations. However, the recently introduced 5 % value-added tax (VAT) in the untested territory, is likely to result in unprecedented impacts in the retail market.

The tax is argued might act as a disincentive to shop in popular retail outlets with unlikely purges in retail sales . To safeguard against a possible backlash in sales, the UAE Federal Tax Authority (FTA)[3] has announced a tax refund scheme for eligible tourists. Starting in November 2018, international tourists may request refunds of value-added tax (VAT) incurred on their purchases from registered retail outlets. Tourists will be able to claim back 85 per cent their VAT on goods they have purchased in the UAE. The remaining 15 per cent will be charged in administration fees to Planet, the global operator of the refund system. Posters on the storefronts of registered stores will be displayed for easier visibility to the visitors with minimum spending of Dh 250 to claim a tax refund. Tourists can claim the refund within 90 days of their purchase. The FTA explained that a special device has been created at the point of departure where refunds will be received from purchases of registered outlets.

Documents required include the tax invoice from the 4000 registered retail outlets, along with copies of their passport and credit cards. Departing tourists will have the option of getting their refunds in dirhams or deposited their credit cards. The scheme is designed “to attract and retain larger numbers of tourists and allows them to enjoy the UAE's unique tourism offering, especially in retail shopping" sentiments expressed by Khalid Ali Al Bustani, director-general-FTA [1] Oxford Economics is a leader in global forecasting and quantitative analysis comprising more than 1,500 international corporations, financial institutions, government organizations, and universities. [2] Data was from Dubai Chamber of Commerce [3] UAE Federal Tax Authority (FTA) is responsible for collecting of federal receipts.

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