More than 275,000 UAE businesses have registered for VAT, but tens of thousands have yet to do so and the government plans to crack down on unregistered businesses, said the director general of the Federal Tax Authority.
Khalid Al Bustani said on Wednesday, “[275,000] is a good number, however in our opinion there is still a large number yet to register and we are working with relevant authorities to get them to do so.”
“We will not tolerate tax evaders, and those people violating the rules and misusing the system. It is public knowledge that the UAE has a VAT, and all companies have an obligation to pay it."
Mr Al Bustani declined to reveal the number of businesses that have yet to complete the VAT registration process. The FTA estimated last July around 350,000 would be subject to VAT and had to register before the year end, which means almost 75,000 companies could be in breach of the new regulations.
The FTA extended the exemption period for administrative penalties for late VAT registrants from December last year until the end of this month to help businesses get ready for the 5 per cent levy introduced on January 1.
Mr Bustani said there would be “no further extension” of the grace period beyond April, and warned that late registrants were still obliged to back-date tax payments to January 1. The FTA has warned that the administrative penalty for late registration is Dh20,000, as well as additional penalties related to late payment of tax.
The UAE is introducing taxes to help offset the effects of lower oil prices, which has reduced government income from hydrocarbons and widened the fiscal deficit. The UAE and Saudi Arabia are the only GCC states to introduce VAT and excise taxes to date, although all member countries signed up to implement the levies by next year.
In addition to the 275,000 VAT registered companies, a total of 14,402 applications have been re-submitted to the government because of initial missing information or details that needed clarifying, Mr Al Bustani said. There are a further 2,160 pending applications.
Of the registered firms, the first tranche have already submitted VAT tax returns as they were subject to monthly audits to streamline the administrative process for the FTA, while a second tranche subject to quarterly audits are due to file returns by the end of this month.
The FTA has recorded a 98.8 per cent compliance rate on VAT returns filed to date, meaning that the vast majority of returns are finalised. This is one of the highest compliance rates in the world, Mr Al Bustani noted.
He said one of the main challenges the government faced in the initial stages of VAT implementation was around consumer rights.
“People were complaining that products were more expensive. But the tax is set at the lowest [global] rate of 5 per cent so there was no excuse for retailers to hike prices,” he said.
Several retailers in Dubai were fined at the end of last year for hiking prices illegally before the roll-out of VAT. Mr Al Bustani explained the FTA had set up a campaign with the Department of Economic Development to advise consumers on their rights, for example urging them to make sure a company is VAT-registered, and inform retailers how to display prices. It is illegal to price a product on the shelf and then charge additional VAT at the till, he said.
Meanwhile, the government is in the final stages of a tender to appoint a “tourist refund operator” responsible for awarding VAT refunds to tourists visiting the UAE.
It is also building a system to enable UAE nationals to recover VAT on self-built residential property, as permitted under the regulations.
The FTA also plans to “raise the bar” in terms of quality of advice provided to taxpayers, by increasing the number of state-licensed tax agents, the director general said. There are 21 at present, and a remaining 56 who have passed the national examination and are in the process of securing a licence.