UAE Federal Tax Authority Looks Back on 100 Days of VAT in the UAE

Tax compliance in the UAE is one of the highest in the world, as 98.8% of all businesses and groups registered for Value Added Tax (VAT) have complied with submitting their Tax Returns on time, where the rate increased after follow ups rom the authority asserted His Excellency Khalid Ali Al Bustani, Director General of the Federal Tax Authority (FTA), at the media roundtable held in Dubai today (Wednesday, April 11, 2018) to look back at the first 100 days of VAT, which went into effect on January 1, 2018.

H.E. Al Bustani stated that this high level of commitment is due to the guidance provided by the FTA, as well as the clarity and simplicity of the procedures, which allow taxable persons to submit tax returns and pay their dues online, any time and from anywhere. Users can access the e-Services portal on the Authority’s official website, which was designed in accordance with international best practices to provide diverse and flexible payment solutions, as well as information and guidance to promote tax awareness and help businesses meet deadlines.

This advanced system now has 275,000 registrants, H.E. explained, noting that it allows taxable persons or their representatives to complete all procedures without having to be physically present at the authority. Starting from opening up an account on the portal, to registering for VAT, to paying due taxes.

H.E. stressed that the UAE is one of the first countries in the world that has implemented a full e-service system. He pointed out that the results of the implementation reveal a steady increase in tax compliance rates, confirming the success of the model adopted by the Authority to encourage self-compliance and voluntary registration for tax purposes.

“The Federal Tax Authority’s call centre has addressed around 100,000 telephone enquiries in the period from January 1 to April 8, 2018, while our experts answered around 70,000 email queries in the same period. This brings the total number of queries and concerns addressed to more than 170,000, which clearly reflects the Authority’s commitment to interacting with its partners from various business sectors, as well as society in general,” the FTA Director General revealed, noting that the number of stakeholders within the UAE tax system is consistently and rapidly expanding, with the FTA having accredited 85 clearance companies and 21 tax agents – with 56 agents currently under process.

Sixty Guides

H.E. Khalid Al Bustani explained that as part of its comprehensive awareness campaign, which targets all segments of society, the Federal Tax Authority has issued 60 guides that cover all legislative and executive aspects of UAE tax regulations, as well as three e-learning modules and 22 infographics. The material covers many fields, including import and export declarations; registering for excise tax and VAT; tax groups; reclaiming excise tax; filing tax returns; and information on warehouse keepers and designated zones.

The FTA Director General called on businesses to take advantage of these guides and study them extensively in order to educate their employees about UAE tax legislations and mechanisms, and ensure a smooth implementation of the tax system. H.E. explained that the FTA’s website (www.tax.gov.ae) allows users to learn about their rights, obligations, and the procedures to follow for each tax requirement, as well as how to calculate tax.

Strategic Partnerships

H.E. Khalid Al Bustani revealed that the FTA has gone to great lengths to spread tax awareness in the community and has forged strategic partnerships with the Ministry of Economy and with economic departments in all emirates. He said that the partnerships established between the FTA and concerned authorities in the UAE include the Ministry of Finance, Ministry of Foreign Affairs and international cooperation, Ministry of Economy and Economic Departments, UAE Central Bank, Federal Customs Authority, Customs departments, Finance Departments, Emirates post, Municipalities and Free Zones authorities in the UAE, as well as important partnerships with private-sector entities, including banks, auditing companies, clearance companies, courier companies and others. The FTA Director General stressed that the strategic partnerships have played a key role in the successful implementation of the UAE tax system.

H.E. Al Bustani asserted that a number of objectives have been achieved, including spreading tax awareness among businesses and consumers and protecting consumers from profiteering and price manipulations. The FTA carried out inspection campaigns to alert non-compliant businesses to address the situation, offering workshops to educate all businesses with regards to the correct way to implement the procedures. These included awareness workshops for land departments to learn about implementing VAT for real estate, as well as sessions about tax refund scheme for embassies and diplomats, which were conducted in coordination with the Ministry of Foreign Affairs and International Cooperation.

Objectives

The Federal Tax Authority’s objectives at this stage are to help businesses comply with tax regulations and procedures, and to facilitate the implementation of a unique tax system that is in line with international best practice. To that end, the Authority’s Board has issued a decision to exempt companies who were late to register from penalties until April 30, taking into consideration the lack of preparedness of some businesses, in order to encourage them to comply with tax procedures and laws, and avoid administrative penalties. However, late registrants will be liable for VAT from the period of which they were expected to register.

H.E. Al Bustani stated that the Authority has launched a roadshow around the UAE, in collaboration with economic development departments, to answer all enquiries related to registration that businesses might have. The tour continues until the end of next week, he revealed, adding that this month will see the first batch of quarterly tax returns submission. H.E. urged businesses to file their returns and pay their tax due as soon as possible and not wait until the final deadline on April 28.

“Feedback from various business sectors has been largely positive and we’ve monitored and seen high tax compliance, as well as remarkable improvement in consumer behaviour and awareness. The Authority will follow up on those businesses that have not yet registered, urging them to benefit from the decision to exempt them from late registration penalties until April 30. The FTA will also follow up on the upcoming first batch of quarterly tax returns, which will cover a large number of SMEs.

Furthermore, the Authority will finalise procedures to formally select the company tasked with handling tax refunds for tourists. It will also begin implementing the tax refund system for national homebuilders, added Al Bustani.

Timely Returns

His Excellency stressed the importance of paying tax well ahead of time in order to have it reach the Authority before the payment deadline; if the amount reaches the Authority after the date, the business in question will be subject to penalties as per the tax legislation. Filing tax returns and paying taxes are available 24 hours a day on the e-Services portal of the FTA website. Taxpayers can click the “VAT” tab; access the tax return form and fill it in; carefully review the information and submit the tax return. Payments, meanwhile, can be made on the ‘Payment’ tab.

“Various mechanisms have been put in place to facilitate these procedures,” H.E. Al Bustani reiterated, “which include comprehensive electronic portals connecting a wide network of banks, exchange offices and finance companies operating in the UAE. These systems, which allow businesses to settle their taxes seamlessly, include e-Dirham cards, direct debits, and the GIBAN system.”