Federal Tax Authority Showcases Progress Made on Indirect Taxes in the UAE 18 Months into their Implementation

  • The Authority organised the session as part of the Lecture Series of the Majalis Affairs Office at the Abu Dhabi Crown Prince’s Court.
  • E. Khalid Al Bustani: Value of taxes refunded through the VAT Recovery on the Building of New Residences by UAE Nationals programme grew by 84.4% in the second quarter of 2019, while the number of approved applications rose 66%.

The Federal Tax Authority (FTA) is invested in facilitating procedures for the Value Added Tax (VAT) Recovery on the Building of New Residences by UAE Nationals programme, asserted His Excellency Khalid Ali Al Bustani, FTA Director General, at a discussion held at the Majlis of H.E. Abdullah Muhair Al Kutbi in Al Mushrif, Abu Dhabi.

Part of the Lecture Series of the Majalis Affairs Office at the Abu Dhabi Crown Prince’s Court, the session explored the subject of indirect taxes in the UAE 18 months into their implementation, bringing together a large number of citizens concerned with the implementation of the tax system, answering their queries, and listening to their suggestions for upgrading the UAE tax system and overcoming any challenges to its successful implementation.

“The VAT Recovery on the Building of New Residences by UAE Nationals programme is in line with the wise leadership’s vision to develop a modern housing system for citizens and ensure their wellbeing,” H.E. Al Bustani explained, revealing that the second quarter of 2019 witnessed significant growth in the number and value of transactions submitted by UAE nationals who’ve built new homes. More than 390 applications – worth approximately AED18 million – were submitted in Q2 2019 by UAE citizens who successfully recovered the taxes they incurred on building their homes, up from 235 application (worth AED9.76 million) submitted in Q1 2019. This amounts to a 66% growth in the number of applications received and an 84.4% increase in the value of these transactions.

The session saw great interaction from participants, answering their queries and offering them a platform to express their opinions. The FTA Director General gave a detailed explanation about the tax legislation implemented in the UAE, as well as the Authority’s tasks, objectives, and strategies; the registration procedures for VAT; the VAT Recovery on the Building of New Residences by UAE Nationals programme; and the e-Services the FTA Provides for consumers.

“The Federal Tax Authority made sure to develop simple online procedures that would allow UAE citizens to recover the VAT they incurred on building their new homes,” H.E. Al Bustani said, noting that the FTA considers the happiness of Emirati citizens to be its top priority. “We are committed to making our services accessible through the latest and most innovative electronic systems. With that in mind, we have developed clear and transparent procedures to facilitate VAT recovery on new homes built by UAE citizens.”

“In an effort to ensure stable homes for all segments of the community, UAE lawmakers were particularly keen to ease the burden on UAE nationals and expatriates alike,” H.E. explained. “To that end, regulations were enacted to ensure that residential properties were exempt from tax, except for the first supply during the first three years following its completion, which is subject to zero-rated tax. Meanwhile, the supply of commercial property – be it sale or rent – is subject to the basic VAT rate of 5%.”

The first supply of a residential building during the first three years of its completion is subject to zero-rated tax, while all subsequent supplies are exempt from tax even if made during the first three years of completion.

H.E. Al Bustani presented a detailed explanation of the taxes applied in the UAE, including 5% VAT for all sectors (one of the lowest rates in the world), with the exception of those exempt as per UAE tax laws, in addition to 100% Excise Tax for tobacco products and energy drinks, and 50% for carbonated drinks. Registration for VAT is mandatory for any natural or legal person who carries out business in case their taxable supplies exceed AED375,000 during the previous 12 months or are expected to exceed that amount in the next 30 days, H.E. noted, asserting that registration, filing Tax Returns, and paying due taxes on time by Taxable Persons are fundamental legal responsibilities to ensure that businesses comply with tax legislation.

The FTA Director General explained that according to Cabinet Resolution No. (40) of 2017 on Administrative Penalties for Violations of Tax Law in the UAE, the administrative penalties for businesses subject to VAT that have not registered include not being able to impose the tax on customers or pay tax on import prior to the disclosure of the imported goods, and the payment of the tax on all supplies made in the period in which the company was supposed to be registered. The business in question is also obliged to pay an administrative penalty for the delay in submitting registration request, and late submission of Tax Returns.

His Excellency said that under the terms of the Resolution, a Taxable Person is entitled to object in accordance with the procedures stipulated in Federal Law No. (7) of 2017 on Tax Procedures. The Person can submit an online request to the Review Committee, which, in turn, examines the application. If the Committee finds that the delay in registering for tax or submitting the Returns is due to technical reasons related to the Authority’s system and after examining the application and making sure that the Taxable Person is not responsible for the delay, the Commission then refunds the penalty.

H.E. Al Bustani said that the Authority is in constant contact with all business sectors to gauge their opinions and build on them to ensure the smooth implementation of UAE tax regulations, achieve their stated objectives, and avoid any adverse effects on their activities. The FTA Director General noted that the FTA’s strategic partnerships with the government and private sectors are an essential component of the UAE tax system’s success.

The Authority began implementing a new tax awareness campaign that will continue for the remainder of 2019 and 2020, reaching out to new business sectors and taxpayers in general. Furthermore, the campaign seeks to increase knowledge of the tax system among members of the community, whereby several seminars and workshops were organised, bringing together experts and stakeholders concerned with the tax system from all seven emirates. This in addition to the campaigns carried out through media outlets and social networking sites.

H.E. Al Bustani pointed out that the e-Services the Authority provides through its website include the VAT Calculator, which allows consumers and service recipients to easily and accurately determine the value of taxes due on their purchases or services they’ve received. The Authority also launched the Tax Registration Number (TRN) Verification service, which allows users to verify that the TRN listed on a certain Tax Invoice is correct, and that dealers and service providers are in fact registered with the FTA. Attendees at the session had the opportunity to experiment with both services themselves.

H.E. went on to highlight to the legal requirements that Tax Invoices must meet, stressing the importance of issuing an invoice for every transaction and making sure that prices displayed on items – or announced for provided services – are inclusive of all taxes. H.E. Al Bustani addressed common mistakes consumers make, offering ways to avoid them, where he urged consumers to request Tax Invoices for their purchases to protect their rights. The Federal Tax Authority is working adamantly to drive the transition towards a full dependence on Tax Invoices for commercial transactions, as well as to raise tax awareness among consumers, and introduce them to their rights and obligations to protect them from attempts to exploit the tax system.

H.E. Al Bustani highlighted the FTA’s approach for coordinating with its strategic partners in the public and private sectors. H.E. also stressed the Authority’s vision and its role in facilitating the implementation of tax laws, underlining the importance of collaboration between the Authority and all relevant entities to achieve further success in the coming stage.

The FTA also conducted awareness tours across the UAE in collaboration with the Departments of Economic Development and Chambers of Commerce and Industry in all seven emirates to address businesses’ queries about registration, submission of Tax Returns, and payment of due taxes. These include the “Tax Clinic” campaign for enhancing direct and continuous communication with business sectors, and the awareness campaign on the importance and requirements of the Tax Invoice.

As a part of this comprehensive awareness plan aimed at all segments of society, the Authority issued several guides, e-learning programmes, and infographics, as well as a variety of short awareness films for all taxable categories, H.E. Al Bustani explained, noting that, if required, taxpayers can use the authorised Tax Agents who are registered on the Authority’s official website to help them with tax compliance.

In accordance with the UAE Cabinet Decision No. (52) of 2017 on the Executive Regulations of the Federal Decree Law No. (8) of 2017 on Value Added Tax, the Tax Returns and payment of due tax to the Authority must be submitted no later than the 28th day after the end of the relevant Tax Period, H.E. noted, urging all businesses registered for VAT to submit the Tax Returns and pay the taxes due well before the deadline, to allow sufficient time for these to be processed and received by the Authority on time.

H.E. Al Bustani cautioned against waiting until the last day to make the payments, as it may cause a delay and lead to the Authority receiving the funds after the deadline. The FTA Director General urged registered businesses to submit their periodic returns on the dates set for them even if the value of their supplies during the Tax Period is equal to zero.

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