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Tax Refund Scheme on Mosque Construction and Operation in UAE

The UAE Cabinet of Ministers issued Resolution No. (82) of 2022, regarding the procedure for recovering the input VAT borne on the construction and operation of Mosques. This resolution is said to take effect 60 days after the date of its publication.
The UAE has adopted another category of refund that will provide financial support to mosques, after refunds to charities, governmental organizations, and Emirati citizens building their own houses, as well as tourist refunds and business visitor reimbursements.

What is Meant by Tax Refund in UAE?

UAE is known for tax refund schemes under various categories such as UAE national building residences, tax incurred on purchases by tourists, charitable activities, and other various government organizations. Through VAT refund schemes, people can claim the amount of VAT paid for a refund through the official website portal of the Federal Tax Authority in UAE.

What Legal Factors Are Involved in Constructing a Mosque in UAE?

A mosque is a sacred place where Muslims perform their salah and worship in front of Allah. UAE has a lot of beautiful mosques all around the emirates and Muslims from all over the world visit the UAE and experience their worship at these beautiful mosques.

However, UAE is a country where everything is regulated and monitored under certain ministries and so is the construction and operation of Mosques. Following are the legal factors involved in the construction and operation of a mosque in UAE:

  • The authority that issues a certificate of operation to a mosque after necessary validation in UAE is The General Authority for Islamic Affairs and Endowments or the local authority concerned with mosque affairs.
  • The entity that participates in the construction of a mosque in UAE is known as the ‘donor’. A donor can be an individual person as well as more than one party.
  • The operator is the individual in charge of running and maintaining the mosque with the proper authority's written consent.

How a Donor Can Claim VAT Refund on the Construction and Operation of a Mosque?

If all of the following requirements are fulfilled, the donor has the right to ask for a refund of the input tax paid to construct the mosque:

  • The donor has paid input tax on products or services that are directly connected to the mosque's construction.
  • Proof that the appropriate authorities have approved the construction of the mosque.
  • The donor must possess a certificate for the founding of a mosque.
  • That the competent authority, including the competent authority itself, has decided to give him the mosque after it has been delivered or planned to be delivered by the donor to any other person unless the transfer is a taxable supply.
  • By demonstrating that the donor runs the mosque in conformity with the authorization granted to him by the appropriate authority.
  • A document provided by the appropriate authority that contains information on the donor's identity that has been determined by that authority in accordance with that authority.

For the purposes of this resolution, the construction of the mosque includes, in addition to the actual building process, equipping it, furnishing it, providing it with the necessary equipment and devices, maintaining it, and doing everything else required to carry out all activities authorized for the mosque to be carried out completely prior to the date of operation.

From When Can Donors or Relevant Authorities Redeem the Vat Incurred on Mosque Construction and Operation in UAE?

The input tax paid beginning on January 1, 2018, for the mosque's construction and operation, may be recovered by the donor or operator, as the case may be. However, this decision will be published in the Official Gazette after sixty (60) days from the initial announcement i.e., August 30, 2022.

Procedure for Tax Refund on Construction and Operation of Mosques in UAE?

If the requirements are appropriately completed, the donor may submit a redemption request using a form created by the Authority for this purpose, and the Minister will issue an order outlining the submission dates.

If the donor has any construction-related payments that have been withheld, he must pay them once the appropriate body has issued the operational certificate for the mosque. The refund application is still regarded to be complete despite this.

Once the Authority receives the refund application, it may do the following:

  • Verify that the refund request submitted by the operator meets all the necessary requirements as guided.
  • Determine the amount that can be returned to the operator after verifying the amount of input tax paid by the operator for products or services that are directly linked to running the mosque.
  • Request for data or documents, then confirm the recovery request.
  • If the requirements and procedures are not completed, the refund request may get declined.
  • The Authority may, at any time it considers necessary, refer the refund request for running the mosque to the verification authority for examination and audit of the recovery request received from the operator.

Read More : VAT Treatment on Gold and Making Charges : UAE FTA Public Clarification.

Ervee is a CPA with international experience in Tax and Accounting. He has over 12 years of experience in accounting and bookkeeping and over a year in VAT implementation, registration, and accounting in UAE. He regularly drives out inefficiencies in company operations and loves the challenge of helping clients find additional ways for an easier and improved compliance and verification of transactions.