From a small cluster of buildings in the desert back in the 70s, Dubai has taken its place among global cities such as New York and Riyadh, with breathtaking structures including the Burj Khalifa and Burj Al Arab that aren’t only real estate assets, but also attract tourists from across the globe. The UAE, which already has expats making up 90% of its population, also draws in millions of visitors every year, as it has evolved into a hub of some of the world’s most talked about shopping malls, as well as traditional souqs and wholesale markets. Dubai is also popular among tourists as a shopping hub, where electronics and luxury brands are available at affordable rates, and shopping fests during the holiday season bring additional discounts to the table. In addition to e-commerce platforms and a connected ecosystem that enables online orders, now retailers in the UAE even have q-commerce, which acts as a marketplace for shops to reach consumers in the same city for deliveries within hours.
Even during the pandemic, the UAE managed to bring in five million tourists in 2020, and in 2022, the country has seen more than five million visitors in just the first four months, indicating how the global crisis didn’t dent the Emirates’ position as a popular destination, as it even became a safe haven that lifted restrictions early on. Retail spending is expected to rise further thanks to the post-pandemic tourism boom, especially in Dubai, which currently hosts 62% of the world’s biggest retail brands and has 80 million visitors flocking to its malls annually. The country’s retail sales are on track to hit $70.5 billion by 2025.
For years gold prices and electronics remained low in the UAE, largely because of its tax-free status, and the country’s allure as a retail tourism hub has remained unchanged by the addition of a 5% VAT, which authorities introduced to ensure compliance with OECD norms. The VAT, which came into effect in 2018, is just a precursor to the upcoming corporate tax and is lower than any other emerging economy. This levy is to be collected at the source, which means that businesses offering products and services need to add VAT to the market price of goods. From the year it was launched till 2021, the UAE managed to collect $26 billion in tax revenues through VAT, while consumer spending has only increased. The contribution to this by travelers may be significant, given that the third quarter of 2020 registered an 8% increase in individual spending among tourists.
But this won’t be a burden on tourists visiting Dubai and Abu Dhabi’s malls and souqs since they can collect a refund on VAT when they leave the country. In fact just like easy payments and contactless purchases in stores as well as malls across the UAE, technology has also been deployed to help tourists get VAT refunds in record time. The UAE’s Federal Tax Authority, which has recently scaled up its inspection visits by 104% to stem VAT evasion, has also showcased solutions to facilitate tax refunds for tourists at the ongoing UAE InnoVATes 2022 event.
Self-service kiosks have been deployed across the Emirates to provide tourists with a digital system that processes their requests for refund of VAT incurred purchases within just two minutes. This cutting-edge tech facilitates speed and convenience for tourists on their way out of the country from an airport, as it works on a digitally connected network of 13 air, land, and maritime exit ports across the UAE. These entry and exit ports are further connected with 13,800 stores registered with the FTA to ensure seamless exchange of purchase data and VAT incurred to verify the eligibility of shoppers before processing refunds.
Through such smart solutions and offering innovation to businesses, the FTA creates a hassle-free experience for tourists to ensure compliance, extend incentives and ensure compliance in the UAE as a global trade hub.
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