Up to 75,000 UAE firms facing fines for failing to register for VAT

Almost 75,000 UAE companies are facing potential fines and other punishments from the government having still not registered for a new value added tax (VAT).

The 5 per cent tax rate came into force on January 1 and applies to most goods and services.

Read: VAT: What are the regulatory challenges for businesses in UAE, Saudi?

The Federal Tax Authority (FTA) extended the first declaration period for filing value added tax returns for some companies in January due to concerns they were not yet ready to file returns. It has also extended a registration deadline from January until the end of April.

Read: UAE tax authority extends first VAT filing period for some firms

FTA director general Khalid Al Bustani told reporters on Wednesday that more than 275,000 firms had registered but tens of thousands more had yet to so.

“[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,” he was quoted as saying by The National.

The FTA estimated last July that around 350,000 UAE firms would be subject VAT and had to register before the end of 2017.

“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,” he said.

No further extension to file returns is being granted to unprepared firms beyond April and late registrants are required to back-date payments to January 1 regardless.

The administrative penalty for late registration is Dhs20,000 ($5,445). Other fines include Dhs15,000 ($4,084) for failing to display prices inclusive of VAT, Dhs3,000 ($817) for a first incorrect tax filing and Dhs5,000 ($1,361) for incorrect filings thereafter.

Failure to submit a deregistration application will result in a fine of Dhs10,000 ($2,723). A first time tax offence will result in a Dhs1,000 ($272) fine and repeat offences within two years Dhs2,000 ($545).

Read: Revealed: Goods and services subject to VAT in the UAE

The FTA said 14,402 applications had been resubmitted to government because some information was missing. The authority has a further 2,160 pending applications.

Registered firms subject to monthly payments have already submitted their returns. Those subject to quarterly payments must submit returns by the end of April.

There has been a a 98.8 per cent compliance rate on returns filed to date.

The government is also in the final stages of appointing a firm to manage VAT refunds for tourists at the UAE’s airports.

Tourists will be able to claim back VAT on purchases made in the county but only if they are not travelling to other Gulf Cooperation Council states where the tax is also coming into effect.

Read: Kuwait’s parliament pushes back VAT vote

The goods must be supplied to the visitor whilst he or she is in the country and the person must be intending to leave within 90 days of the purchase. The visitor must also be from outside the GCC.