Federal Tax Authority Marks 500 Successful Days of VAT in the UAE
The rates of compliance with tax laws and procedures have increased exponentially among all taxable businesses,” said His Excellency Khalid Ali Al Bustani, Director General of the Federal Tax Authority (FTA), in a press statement issued by the Authority to mark 500 days of Value Added Tax (VAT) in the UAE, which went into effect on January 1, 2018, at a rate of 5% on the supply of most goods and services.
“Compliance was made possible by the seamless, flexible, and clear procedures the FTA has rolled out through electronic, fully paperless systems that are among the most advanced of their kind in the world, underpinned by a sophisticated legislative environment that meets the highest standards in the field,” H.E. Al Bustani added. “The Federal Tax Authority implemented an easy-to-use system for submitting tax returns and paying due taxes via the e-Services portal, available 24/7 on the FTA’s official website www.tax.gov.ae, which was designed to meet the highest international standards, offer diverse and flexible payment options, and provide information and guides to raise tax awareness.”
The FTA Director General said that as part of the Authority’s efforts to manage and collect federal taxes, various tax refund mechanisms have been launched for legally eligible groups to recover VAT, including the Tax Refunds for Tourists Schemes. H.E. noted that the Authority has processed 1.46 million digital transactions to refund taxes to tourists. The system has been lauded by tourists for its fast, easy, and clear procedures, where nearly 8,110 transactions were processed on a daily basis.
H.E. Al Bustani highlighted the success of the VAT Recovery on the Building of New Residences by UAE Nationals programme, noting that the Authority has issued a manual through its website, offering an extensive explanation of the procedure.
“A significant number of UAE citizens have benefited from the VAT Recovery on the Building of New Residences by UAE Nationals programme, with its simplified electronic procedures,” H.E. said. “The system has received more than 800 applications, 375 of which were approved allowing applicants to recover AED14.74 million worth of taxes, incurred on the construction of their homes. This aligns with the vision of the UAE’s wise leadership to develop a modern housing system for citizens and provide high living standards for them.”
“As of April 2019, the FTA began implementing the VAT Refund Mechanism for Visiting Foreign Businesses, receiving a number of refund requests for taxes incurred in 2018 by foreign businesses,” H.E. Al Bustani continued. “This mechanism calls for refunding taxes paid for supply or import undertaken by any legal Person not residing in the UAE or any other country that implements VAT, conducting business but is not taxable. The system covers the countries that reciprocate and refund VAT to visiting UAE businesses.”
“The Federal Tax Authority has made significant achievements in a relatively short period of time, progressing along its strategic plans that seek to provide best-in-class services to businesses in terms of managing and collecting federal taxes with efficient and flexible procedures. The objective is to diversify sources of income by providing sustainable resources for future generations to finance strategic projects, develop infrastructure, and provide high-quality services to citizens and residents,” the FTA Director General explained.
“In light of the positive results and successive recent achievements, the UAE’s tax system has become a role model, as it encourages auto-compliance through sophisticated yet seamless electronic procedures. The system has earned praise from experts and official entities in the UAE, the region, and the world,” he continued. “This has been made evident by the Federal Tax Authority’s participation at the Arab Regional Tax Forum, which Dubai hosted in March 2019, as well as its participation in April at the Belt and Road Initiative Tax Administration Cooperation Forum in China, where it showcased the UAE’s experience with implementing tax laws.”
These achievements and the tremendous progress the UAE has achieved in its tax systems have culminated in the country being elected to serve as Vice Chairman of the Board of Directors of the Belt and Road Initiative Tax Administration Organisation, H.E. said.
“The Federal Tax Authority has successfully provided all procedures required to implement integrated tax legislation, clearly outlined mutual obligations between the FTA and taxpayers, and provided an ideal environment characterised by transparency and good governance, which, in turn, led to a smooth introduction of VAT that only has a short-term effect on businesses,” H.E. Al Bustani went on to add.
H.E. Al Bustani revealed that the number of users who registered in the system for VAT purposes has exceeded 300,000 companies, individuals, and tax groups, asserting the FTA’s commitment to maintaining continuous communication with all parties concerned with the tax system, answering as many as 405,000 phone queries and 105,000 emails, bringing the total number of enquiries processed in 500 days to more than half a million. Meanwhile, the user base is expanding rapidly, which compelled the Authority to authorise 123 clearing and forwarding companies, increase the number of accredited tax agents to 357, and commission 28 accredited tax accounting software vendors.
His Excellency asserted that the Authority is implementing a continuous awareness campaign; it has issued 55 guides on VAT, a series of e-learning programmes, educational short films, and about 50 infographics, in addition to 229 “Public Clarifications”, including 218 specific clarifications addressing specific enquiries and 11 general clarifications that seek to raise awareness and promote auto-compliance. H.E. noted that the FTA provides comprehensive and continuously updated information on laws and regulations through its website, allowing businesses and members of the community to know their rights and obligations, and to learn how to calculate taxes for themselves.
H.E. Khalid Al Bustani said that the Authority has organised some 95 seminars and awareness sessions attended by nearly 30,000 experts in various business sectors. Furthermore, the FTA recently launched new campaigns, most notably the tax invoice campaign beginning in the first quarter of 2019, to promote the use of tax invoices in all business transactions in tandem with the “Tax Clinic” campaign launched in August 2018 to establish direct contact with the business sectors, raise tax awareness among them, and identify any obstacles they may be facing.
The FTA Director General added that the Authority was committed to forming strategic partnerships with all relevant federal and local government authorities, as well as the private sector. These partnerships play a key role in the successful implementation of the tax system, and the achievement of its objectives, which include raising tax awareness among businesses and consumers; protecting consumers rights; deterring businesses from exploiting the tax system to increase prices; and organising joint inspection campaigns in coordination with the Ministry of Economy, Departments of Economic Development, and municipalities to alert businesses that have failed to comply with regulations and urge them to correct their situation.
H.E. lauded the close cooperation with the Federal Customs Authority and local customs departments in order to link their systems with the Federal Tax Authority’s network, which contributed to the smooth implementation of the tax system and to maintaining the flow of foreign trade.
H.E. Khalid Al Bustani asserted: “The coordination with the Ministry of Finance and the UAE Central Bank played a key role in facilitating payment of due taxes and refunds. The payment mechanisms available include the UAE Fund Transfer System (UAEFTS) of the Central Bank, which ensures the rapid transfer of funds through accounts and enables Taxable Persons to pay their taxes through the branches of nearly 77 banks, exchange offices and financial firms across the UAE. These payments are made using the GIBAN or e-Dirham systems.”
“The Authority spared no effort in assisting businesses to comply with tax regulations and procedures, organising several introductory and consultation meetings to prepare the private sector for dealing with the tax system,” H.E. concluded. “We have held 40 joint meetings with business groups and representatives of concerned sectors, which include banks; insurance; financial markets and brokers; importers; exporters; telecommunications companies; travel and tourism agencies; diplomatic missions; free zones; shipping companies; accounting and audit; maritime operations companies; maritime suppliers; real estate; charities; healthcare; education; hospitality; gold and diamond traders; new and used automobiles; vegetables and fruits; fisherman’s unions; farmers; and retailers (particularly those taking part in the VAT Refund Scheme for Tourists); among others.”
Federal Tax Authority
By virtue of this Federal Law by Decree a public federal authority shall be established under the name of the Federal Tax Authority. The headquarters of the authority shall be located in the city of Abu Dhabi. The authority shall be in charge of managing and collecting federal taxes and related fines, distributing tax-generated revenues and applying the tax-related procedures in force in the UAE.
The authority shall be managed by a board of directors chaired by the Minister of Finance and a sufficient number of members to be appointed and remunerated by a Cabinet resolution, based on the chairman’s nomination. The authority shall have an independent annual budget that shall be deemed as public funds and exempted from all taxes and fees.
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