VAT in GCC
Sector Impact > Tourism
Tourism is a very important sector for economies diversifying from Oil & Gas revenue in the region and may have to revise pricing strategies to reflect the impact of VAT.
Tourism and Air Transport industry are complementing each other. Tourism depends on transportation to bring visitors, while the transportation industry depends on tourism to generate demand for its services. Transportation of passengers to and from the kingdom of Bahrain will be zero-rated and the airline companies can claim the refund for the input tax paid on their purchases.
Tourism and hospitality go hand in hand, the hospitality industry offer services like accommodation, transportation, food and beverage, recreation and leisure to the tourists. The hotels will be charging a standard rate of 5% on the hotel accommodation, food and beverage services etc. Even though the services are booked from outside of GCC countries, as the place of supply for hotels is the place of actual performance, the standard rate is applicable.
Tourists who purchase goods such as electronics, consumer appliances, textiles and other goods will be charged VAT. Bureau shall, in accordance with a mechanism it shall set, allow Tourists to request a refund of Tax paid in the Kingdom on Goods transported outside the territory of the Implementing States, provided the following conditions are met:
- The Supply of Goods is made during the Tourist’s stay in the Kingdom of Bahrain.
- The Goods are acquired for personal use.
- The Goods are supplied by a Supplier authorized for this purpose. The Bureau shall issue a list of all Suppliers authorized to implement the refund mechanism.
- The Tourist shall leave the Kingdom within two months from the date of Supply with the Goods he has purchased.
The refund application of Tax paid by the Tourist shall include the following:
- Proof of payment of Tax such as a Tax Invoice or any similar document in accordance with the provisions of the Law and these Regulations.
- A description of the Goods purchased in the Kingdom subject to the refund application.
- A copy of the passport and travel ticket.
NBR is yet to come out with the tax refund mechanism for the tourists.
Tourist VAT Refund Scheme
The Dubai Tourism sector is going to benefit greatly from the FTA’s announcement outlining the rules and regulation for VAT Refund to Tourist purchases.
The UAE’s Federal Tax Authority (FTA) has announced that from November 2018, eligible tourists will be able to receive a proportion of the VAT as a refund when they shop at registered stores.
The UAE’s Federal Tax Authority has appointed Planet as its exclusive tax refund operator for the Tourist Refund Scheme
Planet is an international company, but for the UAE operations and executing the Tourist Refund Scheme in the UAE, a Special Purpose Vehicle (SPV) has been set up, and the project will be executed by Planet along with local partners.
The FTA had said that outlets and points of sales across the country will be connected for the tourist refund scheme.
Tourist refunds will only be possible if they purchase goods from retailers registered with FTA. Designated spaces will be provided where tourists can easily reclaim taxes through an electronic system, without any human involvement. The digital system determines the taxes that are eligible for a refund and then reimburses tourists.
Click here to read more about the VAT Refund to Tourist purchases.
Sector VAT News Update
Sector impact analysis is provisional based on the GCC Draft and may change when the country issues the relevant VAT laws.