Last-minute appeal for firms to register for VAT
▶ An estimated 350,000 companies should have registered for the levy, but some have yet to do so
A 5 per cent value added tax in the UAE will be implemented on Monday, but several businesses have yet to register with the Federal Tax Authority.
The authority is urging businesses to register immediately, although the December 4 deadline for registration has long passed. Failure to register within the timeframe incurs a Dh20,000 fine.
“The UAE’s businesses have responded remarkably, and the number of registrants is increasing significantly, however there are still unregistered businesses and we urge them to register immediately,” the authority said.
“The FTA is keen to co-operate with all sectors and provide the support they need to conduct business while complying with tax legislation.”
Although the authority has declined to reveal the number of businesses that have yet to register, Khalid Al Bustani, the authority’s director general, said in August that an estimated 350,000 businesses were subject to VAT and should register by year end.
The authority opened registrations in September for the tax, which is being introduced alongside Saudi Arabia on January 1.
Although all six Arabian Gulf countries agreed last year to introduce the GCC-wide levy, so far only the UAE and Saudi Arabia have committed to a date.
The UAE’s Federal Tax Authority said yesterday there were still a number of businesses yet to register for the value-added tax that will be introduced countrywide on Monday.
“The UAE’s businesses have responded remarkably, and the number of registrants is increasing significantly.
“However there are still unregistered businesses and we urge them to register immediately,” the authority said.
“The FTA is keen to co-operate with all sectors and provide the support they need to conduct business while complying with tax legislation.”
The authority declined to give the number of businesses in the country that have yet to complete the VAT registration process .
Khalid Al Bustani, the director general of the FTA, said in August that an estimated 350,000 companies were subject to VAT and should register by the end of the year.
Online registration for VAT began in September, but experts say many businesses waited until the publication of the VAT executive regulations in November before they started the registration process. The fine for failure to register within the official timeframe is Dh20,000.
Businesses were advised to complete their registration before December 4, as the authority requires, by law, 20 working days to access and process their applications, Mr Al Bustani said in November.
The UAE and Saudi Arabia will be the first Arabian Gulf countries to introduce 5 per cent VAT on January 1 as a step toward generating revenue streams to shore up dwindling oil income for the governments.
Other Gulf states have yet to publish their VAT laws or give a definitive timeline for introducing the levy, which they agreed in 2016 to implement GCC-wide.
Oman media quoted unnamed finance ministry sources this week as saying the Gulf state will delay the launch of VAT until 2019, without citing a reason.
“According to an agreement between the Gulf Co-operation Council countries, VAT should be implemented across all member states by 2019,” said the UAE tax authority.
“FTA is co-ordinating with customs across the UAE to inspect and prevent any potential smuggling of goods related to implementing VAT.”
Introduction of VAT is just one of the fiscal reforms being implemented in the region.
The goal is to help bridge fiscal deficits caused by lower oil prices.
The UAE and Saudi Arabia earlier this year introduced an excise tax on energy drinks and tobacco at a rate of 100 per cent and on fizzy drinks at a rate of 50 per cent.
The kingdom, the region’s biggest economy, estimates that income from levying of VAT next year alone will reach 23 billion Saudi riyals (Dh22.53bn).
Revenue from excise tax will top 9bn riyals.
The IMF estimates revenue from these reforms, which will vary across countries, could generate 1.7 to 6.6 per cent of non-oil GDP by 2020, depending on each country’s pace of reforms.
The introduction of VAT in the region could generate new revenue of 1.5-3 per cent of non-oil GDP, the fund said earlier this month.
The UAE Economy Minister Sultan Al Mansouri has estimated that VAT will generate Dh12bn in its first year of implementation and Dh20bn in its following year.
The levy in the UAE is expected to increase consumer prices by around 1.4 per cent next year, Mr Al Bustani said in August.
The tax will have 0.42 per cent impact on the gross domestic product in the first year of implementation, the UAE’s Minister of State for Financial Affairs Obaid Al Tayer told the Federal National Council earlier this month.
VAT in the UAE is expected to increase consumer prices by around 1.4 per cent next year, the FTA director general said