Review: 3 years of achievements since the introduction of VAT
H.E. Khalid Al-Bustani: “The increase in compliance rates reflects the growth of tax awareness in business sectors”
The integrated electronic structure operated by the FTA contributed to the remote provision of its services, enhancing precautionary measures designed to combat the spread of Covid-19
The Authority successfully processed 500,000 telephone inquiries and nearly 250,000 online inquiries
221 remote awareness events were organized by the FTA in 2020
332,390 VAT registrants, growth of 6.54%
AED 336.44 million refunded to UAE Nationals based on 4,835 Homebuilder Tax Refund Requests
The newest generation of “eDirham”, and issuance services of “Tax Residency Certificates” and “Commercial Activities Certificates” are now available on the FTA’s website
Abu Dhabi – UAE, 27 January 2021: During 2020, the Federal Tax Authority has maintained ever-increasing performance rates and has continued to implement its development projects across all areas of its work in accordance with its target plans.
His Excellency Khalid Ali Al-Bustani, Director General of the Federal Tax Authority - in a press release issued today marking the third anniversary of VAT application - has confirmed that for the third consecutive year, the FTA continued to achieve rising performance rates while continuing its efforts to manage, collect, and implement federal taxes with procedures and mechanisms distinguished by their ease of use, transparency, and clarity through its modern electronic systems, pointing to the high compliance rates among taxable persons in light of the greatly increased awareness in business sectors, and the ease and flexibility of the procedures.
His Excellency said: “During 2020, the Authority maintained increased results, with preliminary statistics showing that the number of registrants for VAT increased to 332.39 thousand registrants of business and Tax Groups and its members, compared to about 312,000 registrants at the end of 2019 and 296,000 registrants at the end of 2018 (the first year of VAT).”
His Excellency emphasized: “Statistics also show that the base of customer and partners benefiting from the tax systems has been steadily expanding, the number of FTA Accredited Tax Agents in the tax system saw steady expansion with the number increasing to 393 compared to 355 at the end of 2019 and 176 at the end of 2018. In addition, the number of FTA approved clearing companies increased to 868 from 122 at the end of 2018, while the number of certified tax accounting system providers jumped to 76 from 12 at the end of 2018.”
His Excellency Al-Bustani went on to say: “The rapid and comprehensive measures taken by the UAE in every aspect to confront the COVID-19 pandemic, had a significant impact in supporting business sectors and taxpayers, and as a result, the impact of the pandemic on taxpayers was limited.”
His Excellency emphasised that the Authority, since its establishment, has been keen to providing a developed digital structure, efficiently providing all of its services remotely through a fully electronic system which provides a range of advanced digital services to facilitate registration processes, filing of tax returns, payment of tax due, as well as facilitating the recovery of tax paid. These digital services allow all of the FTA’s procedures to be completed in quick, easy, and paperless steps without the necessity for personal contact, which has contributed to implementing physical distancing procedures and maintaining public health as an absolute priority.
Supporting Tax Registrants
His Excellency continued: "During 2020, the Authority provided various facilities to support registrants in the tax system to fullfil their tax obligations and ensure business continuity under the precautionary measures put in place by the UAE to prevent the spread of Covid-19. These facilities included the temporary extension of the tax period commencing on the 1st of March for Excise Tax Registrants to cover both March and April 2020. They also included specifying an alternative deadline for the submission of VAT Returns and payment of any tax due for tax periods that coincided with government procedures to carry out precautionary sterilization operations. Moreover, VAT was temporarily applied at the zero-rate on some personal protective medical equipment, such as masks and other items.”
Raising Awareness Remotely
His Excellency said: "The Authority had been working to ensure the safety and security of its staff members and clients through implementing the remote working system relying on the most up-to-date technologies, to maintain physical distance and to observe precautionary measures. The Authority also maintained continuous communication with all those involved in the UAE tax system by organizing a series of seminars, workshops, and meetings with its partners in both public and private sectors, via remote video conferencing. These events were aimed at raising tax awareness, and shedding light on how to avoid the common errors that were identified across the initial implementation of tax system.
During last year, the Authority conducted 221 remote awareness sessions via remote video conferencing, benefitting representatives from different business sectors and those involved in the tax system. These sessions included seven remote gatherings for SME representatives within the FTA’s ‘Tax Clinic’ initiative, 206 meetings with representatives of large companies; four workshops for UAE nationals regarding the refund of tax paid on their newly built homes, two workshops for FTA accredited tax agents, and two workshops for more than 40 representatives of accredited clearance companies.
During the last three years, the total number of telephone inquiries responded to by the Authority have reached up to 554,400. Furthermore, more than 235,370 e-mails were processed by the FTA.
His Excellency Khalid Al-Bustani continued: “Through our implementation of directives from our wise leadership to provide all forms of support to achieve housing stability for UAE citizens, the year 2020 saw the launch of a new electronic platform with more facilities for the recovery of VAT paid by UAE Nationals on the construction of their homes, through the FTA’s website. As part of the Authority’s strategy of continual system reviews aimed at providing the best services at the highest levels of efficiency in performance, the Authority has reduced the minimum number of documents required to submit the refund request.”
The Federal Tax Authority’s recent performance analysis shows that at the end of 2020, the total number of processed refund requests submitted by UAE Nationals to recover taxes paid on their newly constructed homes had increased to 4,835 with a total value of AED336.44 million, compared to 1,496 requests processed by the end of 2019 with a total value of AED87 million, a record annual growth rate of 223.2% in the number of approved requests, and 286.71% in the value of refunded tax.
His Excellency Khalid Al-Bustani mentioned that during 2020, the Federal Tax Authority launched many new services and systems, such as issuing certificates for Tax Residency and Commercial Activities through the Authority’s website. These Certificates allow UAE residents (companies and individuals) to benefit from agreements which have been concluded by the UAE with a number of other countries to avoid double taxation (DTAA), and enabling the recovery of VAT imposed on Emirati businesses in these other countries if they are registered with the Authority.
Upgrading Payment Streams
His Excellency said: “In the context of our keenness to continuously develop the Authority’s official payment channels and encourage the use of electronic payment methods, the year 2020 saw the FTA’s accession to the third generation of the e-Dirham system with its diverse channels launched by the UAE Ministry of Finance to allow the efficient collection of fees and revenues of the UAE, and provide more options for the payment of such government fees by using the latest technologies underpinned by the best safety standards.”
With this important step, the Federal Tax Authority enabled registrants to fulfil their tax obligations and complete their transactions directly by downloading the e-Dirham 'Mubasher’ application on their smartphones without the need for bank cards, as registrants are only required to link their account with a registered bank to the application in order to complete all of their FTA related-transactions.
The new generation’s payment channels of e-Dirham includes 3 cards with different benefits: The ‘Hala Card’ which is suitable for new individual customers who want make one-time payments; the ‘Gold Card’, a prepaid card with multiple recharge options suitable for regular payments and regular transactions; and the 'Premium Card', a customisable prepaid card that is suitable for individual and corporate customers with high balances without a maximum recharge limit.
His Excellency added: "Joining the new generation of the e-Dirham system came as part of the FTA’s efforts to upgrade the various methods of payment available for the Authority's clients.
In addition, His Excellency noted that tax payments using the Generated International Bank Account Number (GIBAN) mechanism via the UAE Fund Transfer System, UAEFTS, has seen increasing use by taxpayers, with its functionality characterized by clarity, ease, and speed of fund-transfer procedures electronically through the system. This mechanism allows tax payments to be made through 77 bank branches, exchange houses, and finance companies throughout the UAE."
The system is implemented under a memorandum of understanding signed between the Federal Tax Authority and the Central Bank of the UAE for electronic integration and linking their systems, in accordance with international best standards and practices, allowing those registered with the Authority to pay taxes due through the UAEFTS, which is characterized by speedy fund transfers between bank accounts.