UAE's FTA extends penalty exemptions period for late VAT registrants to April

The tax authority wants to help businesses comply with the 5% levy

The UAE and Saudi Arabia are the only Arabian Gulf countries so far to introduce VAT and excise taxes. Chris Whiteoak / The National

The UAE Federal Tax Authority extended the exemption period for administrative penalties for late VAT registrants until the end of April to help businesses get ready for the five per cent levy introduced on January 1.

“The Board [of directors of the Authority] approved a plan to exempt businesses that are late in registering with the Authority from administrative penalties until April 30, 2018,” the authority said in a statement on Wednesday. “This takes into consideration the lack of readiness of some businesses during the first phase of VAT implementation, and reflects FTA’s commitment to assisting businesses and encouraging them to be compliant with the tax procedures and to avoid administrative penalties.”

About 260,000 companies out of an estimated 350,000 have registered for VAT, the authority’s director general Khalid Al Bustani said in January, but the FTA is showing leniency in terms of imposing fines for late registration. To help companies comply correctly with VAT regulations, the authority extended the deadlines for filing tax returns, a move experts say will help struggling businesses.

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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.

“The FTA is actively contributing to achieving the long-term strategic objectives of the tax system,” said Sheikh Hamdan bin Rashid Al Maktoum, Deputy Ruler of Dubai and Minister of Finance. “The foremost goal is to promote economic diversification by providing sustainable sources of income for future generations to finance strategic projects such as infrastructure development and deliver more public services for citizens and residents.”