UAE's FTA sees more businesses registering for taxes in 2019

The number of UAE businesses registering for VAT to grow as more companies mature and become eligible for taxation

ABU DHABI, UNITED ARAB EMIRATES. 15 AUGUST 2017. Press conference hosted by the Federal Tax Authority at the Ministry of Finance about the upcoming launch of VAT. Khalid al Bustani, Director General of the Federal Tax Authority. (Photo: Antonie Robertson/The National) Journalist: Dania Alsaadi. Section: Business.
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The number of UAE businesses registering for taxation in 2019 is set to grow from levels previously seen in 2018 as more companies become tax compliant, the head of the Federal Tax Authority said.

The limited number of businesses and people that registered for taxation last year was due to a lack in compliance, Khalid Al Bustani said at the sidelines of the Arab Regional Tax Forum in Dubai on Sunday. However, he said the authority had conducted numerous awareness campaigns to limit the number of those penalised for non-compliance.

The rise in the number of new businesses launched in the UAE will also result in an increase in the number of registrations this year, he added.

“Regarding registration, this is a dynamic process because we have companies that are still reaching the compulsory threshold, when they reach that they need to register,” Mr Al Bustani said.

The Emirates introduced a 5 per cent VAT in January last year, and in 2017, it rolled out an excise tax on fizzy and energy drinks and tobacco, to diversify income and create new revenue streams as part of a plan to lower dependence on oil revenues. The International Monetary Fund estimates the introduction of VAT in the Arabian Gulf region could generate between 1.5 to 3 per cent of non-oil GDP in new revenue.

The level of tax compliance in the country has increased with the number of registrants for VAT exceeding 300,000 businesses – tax groups and individuals – the FTA said last week. Meanwhile, the number of registrants for excise tax reached 719.

Mr Al Bustani said the UAE Foreign Business Refund programme, which enables non-resident businesses to claim back 5 per cent VAT, is still on track for launch on Monday.

“Non-resident businesses can apply and we will receive their request, similar to a tourist, they will apply online and we will study it and verify it, then refund their VAT,” said Mr Al Bustani.

While foreign businesses can claim VAT refunds for 2018, they can only do so under four conditions. These include not having a place of establishment or fixed establishment in the UAE or in any of the VAT-implementing GCC states, not being a taxable person in the UAE, being registered as an establishment with a competent authority in a jurisdiction that implements VAT and that equally provides VAT refunds to UAE businesses in similar circumstances.

The Arab Regional Tax Forum comes at a time when countries in the Arab world are looking to reform tax administration through new legislations and administrations to support economic competitiveness.

“In the Arab world, all countries are looking into increasing their tax revenue to fund their economic development and create new jobs, support the infrastructure, social services,” said Mr Al Bustani.

Managing tax administration and compliance were vital areas and discussions during the forum focused on how governments can introduce systems that are business friendly and encourage tax compliance, he added. An example of this is the UAE's incorporation of technology and electronic systems for registration of payments and refunds.