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UAE tax authorities refund taxes incurred on construction and operation of mosques

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Abu Dhabi: Pursuant to Cabinet Decision No. (82) of 2022, the Federal Tax Authority (FTA) has launched a mechanism for the refund of Value Added Tax (VAT) related provisions for the construction and operation of mosques on the FTA e-Services Portal Effective October 29, 2022, covering all mosques in the UAE, provided that the refund application is submitted within the deadline of the mosque construction completion date.

In a press statement issued today, the FTA announced that, effective Tuesday, November 1, 2022, it will begin accepting applications for input tax refunds arising from the construction of mosques through the FTA’s e-Services Portal. Tax refund applications arising from operating a mosque will be accepted later on the same portal.

Khalid Ali Al Bustani, Director General of the FTA, stressed the importance of the decision, which is in line with the wise leadership’s directive to encourage charitable work and pro bono activities in accordance with the UAE’s existing laws.

“The IRS is committed to providing clear and transparent procedures, standards and processes for the convenience of customers,” he added. “With this in mind, the rebate mechanism is designed to provide refunds for construction, operation or maintenance to taxpayers who meet the legal requirements for rebates. VAT on mosques. This, in turn, is part of the Authority’s strategy to ensure customer happiness through a simple online process through the FTA’s e-Services Portal.”

The Authority explained that, according to the Cabinet decision, basic conditions must be met to be eligible for input tax rebates for the construction of mosques: the donor must have incurred input tax on goods or services directly related to the construction of the mosque; the construction needs to be approved by the competent authority (Islamic Affairs and the General Directorate of Donations or the local authority concerned with mosque affairs); the donor must have proof of mosque operation. In addition, one of two conditions must be met: the mosque has been handed over or is intended to be handed over by the donor to any other person approved by the competent authority, or the donor operates the mosque based on the approval obtained from the competent authority.

The Cabinet decision stipulated that basic conditions must be met in order to be eligible to claim a refund of input tax arising from operating a mosque: the operator has the right to claim a refund of input tax arising from goods or services directly related to the operation and maintenance of the mosque. Mosques, provided they are not related to the commercial annexes of the mosque or its operation; mosques must be registered as mosques with the competent authority; operators must hold a written permit issued by the competent authority to operate the mosque for a limited period of time, when they apply for withdrawal valid during the period of payment.

The free trade agreement outlines the criteria for recoverable expenditures, stating that input tax refunds arising from the construction of the mosque include expenses related to the actual construction process of the mosque, the equipment and furniture of the mosque, the supply of necessary equipment and fixtures, maintenance, and the operation of the mosque. Everything needed to maximize all authorized activities of the mosque by the date. Recover input tax arising from the operation of mosques, including goods or services directly related to the operation or maintenance of mosques, as long as they are not related to the commercial appendages of mosques or their operations.

In its press statement, the FTA detailed the documents required for an input tax refund application arising from the completion of the construction of the mosque, which consists of two stages: the first stage consists of providing a copy of the mosque commencement certificate, a copy of the Emirates ID or passport, a bank account proof and any other documents required later. Meanwhile, the documents required for the second stage include the first building plan approved by the municipality showing all the buildings on the land, the first construction permit, a copy of the contracting agreement (with all attachments), a copy of the consultant contract (with all the attachments attached) Appendix), a copy of the Bill of Quantities, a copy of the Bill of Materials, and all complete tax invoices with proof of payment (e.g. receipts or payment stamps), and any other documentation required at a later stage.

The Federal Tax Service explained that the documents required to claim the refund of input tax arising from operating a mosque include a copy of a time-limited renewable written permit to operate a mosque issued by the competent authority, a copy of Emirates ID or passport, proof of bank account, A schedule of mosque operating expenses and copies of the five highest value tax invoices.

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