The UAE's Federal Tax Authority (FTA) said on Thursday said that there are still a number of businesses in the UAE that have yet to register for value-added tax (VAT) which will be introduced in the country on January 1. .
"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 in an emailed reply to The National questions. "The FTA is keen to cooperate 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 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 year-end. Online registration for VAT began in September, but experts say many businesses have waited till the publication of the VAT executive regulations in November before they began the registration process .
Fine for failure to register within the official timeframe is Dh20,000. Businesses were advised to complete their registration formalities before December 4, as the authority requires, by law, 20 working days to access and process their applications, Mr Al Bustani said in November.
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The UAE and Saudi Arabia will be the first two Arabian Gulf countries to introduce 5 per cent VAT on January 1 as a step toward generating new 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 till 2019, without citing a reason.
“According to an agreement between the Gulf Cooperation Council (GCC) countries, VAT should be implementing across all member states by 2019,” said the UAE tax authority. “FTA is coordinating 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 to help bridge fiscal deficit caused by lower oil prices. The UAE and Saudi Arabia, earlier this year 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 and revenue from excise tax will top 9bn riyals.
The IMF estimates that 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, however, 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.