VAT will happen from January 1, so stop the denial and prepare
For VAT truthers, like myself, trying to convince readers that it’s launching on January 1, 2018, my task is made more difficult by the dreary amounts of zeros involved.
I was asked recently what difference VAT would make economically. The Government has stated that these monies are needed to invest in public services. We do live in a country with high-quality infrastructure and ambition for more of the same. At this stage in its economic development, the GCC is correctly beginning to seek a contribution from those who are utilising government services.
Currently, predicted VAT revenues amount to Dh13 billion in 2018. The published Federal Budget for the same year is Dh48.7bn. This makes VAT revenues 26.7 per cent of the total budget for the year 2018. As the late US senator Everett Dirksen said, “A billion here, a billion there, pretty soon it adds up to real money.”
Is there anyone reading this who would voluntarily defer the opportunity to earn 26.7 per cent of their forecast spend for the upcoming financial year? No, there isn’t. This raises the question as to why so many of the same people believe that the launch of VAT will be deferred.
VAT is a self-declaration system. You the reader, a VAT registered entity, will manage your own VAT environment. You will implement and apply the VAT rules to the processes of your organisation. You will declare to the Federal Tax Authority (FTA) and pay any monies you owe. You will be responsible for proving, during an FTA audit, that you are compliant with VAT rules.
The FTA on behalf of the Government needs to register you for VAT, issue you a Tax Registration Number (TRN), facilitate your periodic online VAT return and accept a payment for the VAT you owe.
The VAT rules are all but agreed. This is the VAT Law and the executive regulations. That’s it.
On behalf of the Government of the UAE, the FTA is pretty much ready. Are you?
But it’s not just about VAT registered entities. Inherently suspicious, the FTA have the legal right to audit any entity. This allows them to confirm that an unregistered organisation is operating in an orderly manner. Critically this means that all entities, all of them, are effectively obliged to keep records in a manner that will pass a VAT audit.
This flows into another key element of VAT. An entity that should be registered for VAT cannot legally trade unless it is registered. This has the effect of compounding the deviation from legislated requirements.
An entity is in breach of FTA rules by not registering for VAT, in addition breaks Department of Economic Development [DED] rules by trading illegally. Two different government departments, two different infringements, two different penalties for the same thing.
Last week, the Director General of FTA, Khalid Al Bustani, said registration should begin a month from now. September 17th would appear to be the date. If you believe you need to register your entity, in advance of that date, pay particular attention to the following.
Screenshots of the FTA’s website, which is not yet launched, that will capture registrations have been shared at their seminars and a verbal walk-through was given. It’s intuitive and something almost all of us have, in one form or another, completed in the past. For example, if you discover that you are missing a required document mid-registration, you can save everything you have done and come back and pick up at the same point later.
Let’s start with your trade licence, which has two purposes here. Firstly, the person named on it is a competent authority who should complete the process, albeit with support if required. A person who has a notarised power of attorney can step in. Secondly, the FTA wants copies of various documents. Get good colour scans of these prepared in advance, starting with your trade licence.
A contact e-mail address must be provided. This will need to be validated before you proceed. You might be choosing to register many legal entities as a VAT group and there are options for this.
The authorised signatory’s passport and Emirates ID will be required, as will the entity’s Articles of Association and any amendments.
All current Customs Authority registrations should be to hand; one for each separate entry point where your entity is registered.
Like in Saudi Arabia, you will need to declare your sales for the previous 12 months and a forecast for the same going forward. Imports and exports must be split, as must GCC vs non-GCC. It would appear that GCC means those GCC countries that are VAT live.
As of January 1, 2018 this will just be the UAE and Saudi Arabia. Unlike Saudi Arabia you will need to provide your bank details, for any refunds you might be due.
Once completed the FTA will revert within 20 working days and assuming there are no queries with the documents provided, issue you with your TRN.
For those considering registering VAT groups, I would advise you to be ready to complete the registration on the first day it opens. If your grouping request is rejected, in part or full, you will then likely need to register each entity separately.
There is much work to be done. If I haven’t made myself clear throughout, VAT is all about you.
VAT revenue is predicted to be Dh13bn in 2018. The Government has stated that this money will be invested in public services