VAT in UAE: New deadline for registration extended till April 30

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VAT in UAE: New deadline for registration extended till April 30

FTA exempts firms from penalty for non-registration.

All UAE businesses that missed the December deadline for VAT registration with the Federal Tax Authority (FTA) were given a major relief on Wednesday as they were exempted from penalties for a couple of months.

The FTA gave these companies until April 30 to register for value-added tax (VAT) to avoid administrative penalties as many of them couldn’t meet the earlier deadline due to technical, manpower and other issues.

Analysts said the companies who missed the deadline were smaller businesses, those in free zones and branches of foreign companies.

An FTA meeting, chaired by Sheikh Hamdan bin Rashid Al Maktoum, Deputy Ruler of Dubai, UAE Minister of Finance and Chairman of the FTA, also reviewed the outcome of the tourist refund tender as the refund system will cover outlets and shops.

“The results of the periodic follow-up show that the response levels to the tax system by the business sectors and all segments of society are very satisfactory. There is a steady increase in the tax compliance ratios, which confirms the success of the model adopted by the FTA which is based on encouraging self-compliance by businesses through easy electronic registration,” Sheikh Hamdan said.

Surandar Jesrani, partner and CEO at Morison MJS Tax Consultancy, stated that the major beneficiaries would be the entities who could not register up to December 4, 2017, or are going to apply now.

“It will include entities like the free zone companies and branches of foreign companies. These entities were expecting some relaxations or exemption from VAT and hence could not register before the given deadline,” Jesrani said.

According to Thomas Vanhee, partner at Aurifer Middle East Tax, the FTA’s announcement concerns mainly the smaller businesses.

“The FTA has reportedly already registered around 260,000 [companies]. It is to be noted that businesses that have not registered for VAT also cannot invoice and collect VAT. In practice, this constitutes additional time for smaller businesses to get compliant with VAT and it grant additional time before they need to file their first VAT return,” he said.

Under the Federal Law No.(7) of 2017 on Tax Procedures, a penalty of Dh20,000 was to be imposed for failure to register within the deadline. The FTA expects 350,000 entities with an annual turnover of more than Dh375,000 to register for VAT.

Naveen Sharma, chairman of the Institute of Chartered Accountants of India (Dubai chapter), said most of UAE businesses did registration in time, but there were some small and medium enterprises that could not register due to lack of preparedness.

This move by the FTA, he said, of not imposing an administrative penalty will be a major relief to SMEs as they will be the beneficiaries of this decision.

Sharma believes this decision will not have any impact on tax return filing by companies as only the administrative penalties for non-registration is extended until April 30.

“The FTA has already extended the deadline for filing returns from one to three months for some business which is helping the business community. Companies must file tax returns as per the timeline given by the FTA,” he added.

On Monday, the FTA called on all businesses registered for VAT to submit their tax returns and pay their due taxes no later than February 28 in order to avoid administrative penalties.

Nirav Shah, director of Fame Advisory, said this decision would encourage businesses who faced issues from IT system readiness and such other aspects would have time to comply.

“If the decision is to not levy any administrative penalties until April 30, then even late return filing may also benefit and may not be subject to penalty. However, we would urge all who are registered to follow their prescribed tax period and file returns in time as stipulated,” Shah added.

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