Tax Refund is a service provided by Baker Tilly to business entities in the State of Kuwait, which purchase goods or services from abroad where local taxes are charged to the relevant purchase invoices by the country from which the goods or services are imported. Such local taxes are refundable.
To be able to restore the amount of taxes included in the overseas purchase invoices, business entities in Kuwait should maintain such invoices and identify the amounts of taxes charged therein for refund purposes in accordance with the applicable tax regulations of each country worldwide.
Certain tax authorities around the world only deal with accounting firms, which are locally registered with them, for tax refund purposes. Therefore, business entities in Kuwait engage a local accounting firm, which is licensed by Ministry of Commerce & Industry and registered with Tax Department in Ministry of Finance as a specialist firm in tax matters. Such accounting firm should be a member of an international professional network with global presence and its members firms are registered with such relevant tax authorities around the world enabling them to restore the taxes paid.
The value added tax (“VAT”) on goods and services are the most common type of taxes in terms of application and refund.
Why VAT on goods and services is refundable?
To be subject to value added tax, goods should be consumed or services should be utilized within the country in which the value added tax is applied. VAT is refundable if any such goods or services are consumed or utilized outside such country.
Which business entities qualify for refund of VAT on goods and services?
The conditions for business entities to be qualified for refund of VAT on goods and services may vary from country to country. However, European Union, for example, requires that a business entity should meet the following conditions to qualify for VAT refund:
- a business entity must not have been based in the refunding EU country or territory; or
- a business entity must not have supplied goods or services in the country where they incurred the VAT – except:
- exempted transport & ancillary services; or
- supplies to customers liable for payment of the related VAT under the reverse-charge mechanism.
(Reference: EU Directive 2008/9/EC of 12 February 2008)
However, any EU country may refuse to refund VAT in this way if the business entity’s country/territory does not grant reciprocal refund rights for VAT or similar to businesses based in that EU country; impose restrictions on the type of expenditure qualifying for refunds; or insist that the business entity appoint a tax representative.
Are the rates of VAT on goods and services the same in all world countries?
No, the VAT rates vary from country to country; even in certain cases, such rates differ from a good or service to another within the same country depending on the applicable tax regulations of such countries.
Does Baker Tilly offer Tax Refund service to businesses and individuals?
Baker Tilly offers Tax Refund service to businesses only.
Why do business entities only engage local accounting firms that are members of global accounting networks for tax refund purposes?
This is because certain tax authorities in different countries only deal with accredited accounting firms who are registered with them. Accordingly, when business entities engage a local accounting firm, which is a member of an international accounting network, this will facilitate handling the processes and procedures with the tax authorities for tax refund in such countries.
What is the expected timeframe required to complete the tax refund process?
The timeframe required to complete such process usually ranges from 3 to 6 months.
Is VAT refund worth efforts involved in the refund procedures?
This depends on the volume and amount of purchases that have been subject to VAT. In case of businesses, such amounts are usually large or the purchases are reoccurring and thus, they are worth the efforts involved in the refund procedures.
What are the examples of business activities that may require VAT registration?
- E-commerce – Sales of Digital Services
- E-commerce – Sales of Goods
- Conferences and Tradeshows
- Importing of Goods
- Drop-shipping of Goods
- Installations and Maintenance Services
- Global Contracts
- Telecom and Network Services