Revealed: How VAT fared in UAE in its first year

It’s been a year since the UAE rolled out the value-added tax (VAT). It was a significant move that changed the way business is done in the country.

Since January 1, 2018, consumers have been paying an extra 5 per cent on most goods and services, ending an era of a completely zero-tax regime. So, how has the new system fared in the past 12 months?

The number of businesses that registered for VAT during the first year of implementation reached at least 296,000 companies and tax groups, while tax returns exceeded 650,000.

The numbers were revealed on Saturday by Federal Tax Authority (FTA) director general Khalid Ali Al Bustani, who highlighted that the introduction of the programme has been successful, despite the challenges faced at the start of the implementation.

“In collaboration with all concerned entities, the Federal Tax Authority set the foundations for a holistic and balanced tax system, making the UAE one of the first countries in the world to implement a fully electronic paperless tax system,” Al Bustani said.

“Our advanced system encourages auto-compliance with procedures, all the while maintaining transparency and accuracy, as directed by the UAE’s wise leadership, which strives to make the UAE one of the best countries in the world by 2021.”

During the first year of VAT, the authority responded to more than 306,500 phone calls about the tax system, while another 147,000 were answered by e-mail. The total number of queries answered by the FTA exceeded 453,500.

“This highlights the authority’s close cooperation with its partners in the business sectors and the community at large. The system’s user base is expanding exponentially, whereby 122 freight forwarding companies were commissioned, the number of accredited tax agents increased to 176, and 12 tax accounting software vendors were contracted.”

The FTA was also able to combat attempts at profiteering by certain retailers, address any failure to issue tax invoices and curb the spread of false rumours.

To intensify tax awareness, the FTA organised 90 seminars and training workshops, which attracted approximately 28,000 experts from various sectors.

Al Bustani said the authority is also currently working to launch new initiatives, most notably the Tax Invoice Campaign, which is scheduled to take place during the first part of the year.

He added that “as part of its holistic awareness plan, the FTA has launched around 30 VAT guides, a series of e-learning programmes and short educational films, as well as 50 infographics and 136 public clarifications” to raise awareness and increase auto-compliance rates.

“Through its state-of-the-art website, the FTA provided comprehensive guidelines on tax laws and their executive regulations, as well as various tax procedures. These guides are constantly updated to enable businesses and community members to know their rights and obligations and learn how to calculate taxes.”