Beware: FTA to get tough on VAT evaders in UAE
Fines of over Dh20,000 on companies flouting VAT registrations in UAE, FTA warns
The Federal Tax Authority will get tough on companies, which are obliged to register for value-added tax (VAT) but have not done so from next month, said a senior official.
Khalid Ali Al Bustani, director general, Federal Tax Authority, said during a media briefing on Wednesday that the postponement of the penalty for late registration till April 30 was agreed to get companies onboard who had not registered yet.
"Beyond this period, there will be no reason for the companies not to register and they will be subject to several penalties. We are working with economic departments to arrange roadshows also to help these (non-registered) companies register. Beyond that, we will take our role for auditing the companies and exchange information with other regulators who register companies to know which companies have not registered for VAT yet," he said.
"They (companies) need to be prepared to have their records audited. We are asking for voluntary submission now and will not tolerate tax evaders. Since companies have enough time to understand law, there is a certain limit after which FTA has to take action.The FTA gave time to businesses to adjust their systems. So now we are having a roadshow in April and there is nothing after that," he issued a stern warning to non-registered companies during a media briefing on Wednesday.
He pointed out there will be several penalties like Dh20,000 for late registration, another penalty for late payment, fine for not submitting returns and even conducting business without VAT registration could also attract fine under tax evasion.
As many as 275,000 companies and individuals had registered for VAT upon completion of 100 days. The VAT compliance ratio, under which companies were obliged to register for VAT for meeting the Dh375,000 threshold, was 98.8 per cent, which is one of the highest in the world, the authority said.
"We had two cycles of compliance and submitting returns where we achieved 98.8 per cent compliance. So far, 275,000 companies have registered. Overall, there has been good compliance with the registration of VAT," Al Bustani said.
Al Bustani noted that the large entities had submitted their tax returns and the results are good.
Upon the completion of 100 days, 14,402 companies were asked to resubmit their applications while 2,160 applications are currently pending with the tax authority. As many as 77 tax agents passed the FTA exam while 21 are currently registered. The remaining 56 are currently complementing registration requirements.
According to FTA, approximately 100,000 telephone calls were answered during the first 100 days, averaging 1,123 calls per day while 70,000 email queries were answered during the 100 days, averaging 787 emails per day.
New mechanism for payment of taxes
In order to make taxpaying easier for companies and individuals, the FTA said that in addition to e-dirham, companies can also pay tax through direct debit and GIBAN transfer from any exchange houses or banks.
"This month, about 80,000 companies are expected to submit their VAT returns and most of them are small and medium enterprises. These companies need to understand that they have to submit VAT returns before the deadline to avoid penalties and not wait until the last minute. Companies wait till 28th to pay VAT returns. Legally, it is the latest date. It doesn't mean that this is the date to submit returns. When companies do that at the last minute, sometimes payment is not received which means they are delayed so they are subjected to a penalty. Plus, they might have technical issues when submitting returns so they need to plan in advance," Al Bustani said.
FTA director-general said there are a large number of companies that are not registered yet. However, he refused to disclose the number of companies FTA expects to register.
"By now, everyone is aware of the VAT. It is in everyone's knowledge that there is VAT in the UAE. Hence, it is an obligation on those companies who reach over Dh375,000 threshold to register for VAT. They are violating the law if they are not registering," Al Bustani warned.
He pointed out that the postponement of penalty doesn't mean that these companies are not obliged to register for VAT. "They are obliged to register from January 1 and pay VAT and declare amount from January 1. They are obliged to comply with the law."
Al Bustani noted that the Authority is working for tourist refund and the aim is to implement the best system in the world.
"We issued a tender and now we are in the final stages. We are waiting for final approval to finalise the contract for the tourist refund operator."
Commenting on the impact of VAT cost of goods, he said microdata of the UAE showed that there was no big increase in inflation due VAT. "Different sectors have witnessed a normal growth as expected."
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