Tax Refund Scheme on Mosque Construction and Operation in UAE

The UAE Cabinet of Ministers issued Resolution No. 82 of 2022, setting out the procedure for recovering input VAT incurred on the construction and operation of mosques. This scheme extends the UAE’s existing VAT refund framework, which already covers charities, government organizations, UAE nationals building their own homes, tourists, and business visitors, to now include financial support specifically for mosque construction and operation.

This guide covers who qualifies for the refund, the legal roles involved, the specific eligibility requirements, a worked example of a refund calculation, and common reasons a request gets declined.

What Is Meant by a Tax Refund in the UAE?

The UAE operates VAT refund schemes across several categories, including UAE nationals building residences, tourist purchases, charitable activities, and various government organizations. Through these schemes, eligible parties can claim a refund of VAT already paid, submitted through the official Federal Tax Authority (FTA) portal.

Also check: VAT Refund Services

Legal Roles Involved in Mosque Construction

UAE mosque construction and operation is regulated and monitored under specific authorities, with clearly defined roles:

• The certificate of operation for a mosque is issued by the General Authority for Islamic Affairs and Endowments, or the relevant local authority responsible for mosque affairs.
• The party that participates in constructing a mosque is referred to as the “donor,” which can be an individual or more than one party jointly.
• The “operator” is the individual responsible for running and maintaining the mosque, with the appropriate authority’s written consent.

Eligibility Requirements to Claim the VAT Refund

A donor can claim a refund of input tax paid toward constructing the mosque where all of the following are satisfied:

• The donor paid input tax on goods or services directly connected to the mosque’s construction
• Proof that the relevant authority has approved the mosque’s construction
• The donor holds a certificate for the founding of the mosque
• Where the mosque has been, or is planned to be, delivered to another person, that transfer has been approved by the competent authority, unless the transfer itself is a taxable supply
• The donor can demonstrate the mosque is operated consistent with the authorization granted by the competent authority
• A document from the competent authority confirming the donor’s identity, in the form that authority requires

For this resolution’s purposes, “construction” of the mosque covers the actual building process as well as equipping it, furnishing it, providing necessary equipment and devices, maintaining it, and completing everything else required to carry out the mosque’s authorized activities prior to its operation date.

Must check: VAT Consultants in UAE

From When Can Input VAT on Mosque Construction Be Recovered?

Input tax paid from 1 January 2018 onward, for the mosque’s construction and operation, can be recovered by the donor or operator, as applicable. The resolution itself took effect 60 days after its initial announcement, effective 30 August 2022.

Worked Example: Calculating a Mosque Construction VAT Refund

A donor funds the construction of a community mosque, paying AED 2,500,000 in input VAT across the building, equipping, and furnishing phases, all directly connected to the mosque’s construction and properly documented with supplier invoices. The donor holds a valid founding certificate, and the relevant authority has issued formal approval of the construction. Once the operational certificate is issued and the donor submits a complete refund application, including all required documentation confirming identity and authorization, the FTA verifies the input tax paid and the amount directly linked to the mosque’s construction, approving a refund of the full AED 2,500,000. Had the donor been unable to produce invoices for a portion of that spend, for example, AED 150,000 in furnishings purchased without proper documentation, that portion would likely be excluded from the approved refund amount, since the FTA can only verify and return input tax it can trace to eligible construction activity.

Procedure for Claiming the Refund

Once the eligibility requirements are met, the donor submits a redemption request using the form the Authority has created for this purpose, following the submission dates the Minister issues. Where the donor has any construction-related payments still outstanding, those must be settled once the relevant authority issues the mosque’s operational certificate, though the refund application itself is still considered complete regardless of this outstanding payment.

Once the Authority receives the refund application, it may:

• Verify the refund request meets all necessary requirements
• Determine the amount refundable after verifying the input tax paid on goods or services directly linked to running the mosque
• Request additional data or documents before confirming the recovery request
• Decline the request where requirements or procedures aren’t fully completed
• Refer the refund request to the verification authority for further examination and audit, where it considers this necessary

Common Reasons a Refund Request Is Declined

• Missing or incomplete supporting documentation. Input tax that can’t be clearly traced to eligible construction activity through invoices and records is unlikely to be approved.
• Missing operational or founding certificates. Both the founding certificate and the eventual operational certificate are core eligibility requirements, gaps here are a common and avoidable cause of delay or rejection.
• Unauthorized transfer of the mosque. Where the mosque is delivered to another person without the competent authority’s approval, the transfer condition for eligibility isn’t met.
• Expenses unrelated to the mosque’s construction. Only input tax on goods and services directly connected to the mosque, as defined under the resolution, qualifies, unrelated expenditure won’t be included in the refundable amount.

Frequently Asked Questions (FAQs)

How Farahat & Co. Can Help

Farahat & Co., a trusted Tax Firm in UAE, assists donors and operators with mosque construction VAT refund applications, documentation preparation, and FTA submission.

Contact Farahat & Co. today to discuss your mosque construction VAT refund requirements.