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A UAE VAT tax return deadline due today delayed one month as confusion reigns

We all saw how the UAE federal authority has been careful sending regular updates informing consumers and businesses about VAT.

To an extent, this has worked, but some companies who had a deadline today are not sure what to do, even as the filing of tax returns was delayed 1 month.

What’s the deadline about?

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Tax returns

The UAE Federal Tax Authority (FTA) had set today, February 28 as a final deadline for companies to submit Tax Returns, according to a Fed statement.

FTA had called on all VAT registered businesses whose first tax periods end on January 31, 2018, to submit their tax returns and pay their due taxes no later than February 28 in order to avoid administrative penalties.

This is no longer the case.

Regardless, Khalid Al Bustani, FTA Director General, said the Authority has provided a simplified process to submit VAT returns and pay due taxes for registered businesses, encouraging them to comply and use the advanced online system to complete the procedures and pay their taxes accurately with four steps through the e-Services portal on the Authority’s website, 24/7.

He said various electronic channels and mechanisms have been activated to facilitate paying tax fees through a wide network of banks, exchange offices and finance companies in the state.

H.E noted that registrants also can pay the taxes through The UAE Funds Transfer System (UAEFTS), main money transfer system, which offers direct linkage between the Central Bank of the UAE and the ‘Federal Tax Authority.

“This allows immediate transactions of tax payments to entities covered by the system, through bank accounts and from 77 bank branches, exchange offices and finance companies around the UAE,” the statement said.

Al Bustani called on businesses registered for VAT to create e-Dirham accounts as soon as possible if they do not already have one, stressing that the e-Dirham is a safe method to pay for government services and VAT.

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The FTA Director General stressed that submitted data should include the 10 basic requirements outlined in the Authority’s comprehensive awareness campaign – “Filing Returns in 4 Steps” – which targeted businesses.

These are: The Taxable Person’s name; address; Tax Registration Number (TRN); the tax period of the tax return; submission date; the value of standard-rated supplies made in the tax period and the output tax charged; the value of zero-rated supplies made in the tax period; and the value of exempt supplies made in the tax period.

To VAT or not to VAT?

This is the question facing Owners Associations (OA) in the new age of UAE VAT, a statement from Asteco’s OA said.

Asteco is a major regional and international real estate services firm based in the UAE.

Owners associations find themselves in a somewhat tricky position since the introduction of UAE-wide VAT from January 1st this year.

Like many organizations, clarity on the exact rules and regulations remain murky, at best,” the OA statement said.

“At the heart of this confusion lies the simple question of whether OA’s are tax exempt or not. Nobody seems able to give a proven answer on this subject, thus opening OA’s up to falling foul of their own inactivity.”

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The catch 22 position revolves around whether OA’s are deemed taxable entities or whether they fall outside of this domain, like many service providers such as schools.

If an OA fails to register they may be hit with a AED20,000 fine ($5,500) for non-registration however, if they do undertake to pay VAT but are subsequently judged to be exempt, they have to go about trying to recover paid taxes.

They got a reprieve as at the meeting held at the headquarters of the Ministry of Finance in Dubai today, the Board of Directors of the Federal Tax Authority (FTA)  approved a plan to exempt businesses that are late in registering with the Authority from administrative penalties until April 30, 2018.

“This takes into consideration the lack of readiness of some businesses during the first phase of VAT implementation, and reflects FTA’s commitment to assisting businesses and encouraging them to be compliant with the tax procedures and to avoid administrative penalties,” it said in a statement.

“If OA’s are found to be taxable entities this will add further costs to all OA’s in addition to the 5% increase in fees,” said the OA statement.

“The individual associations will have to increase their internal costs to owners to cover the admin, budgeting and auditing fees associated with administering such a system.,” it added.

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Neither RERA nor the Federal Tax Authority (FTA) has committed either way at this stage, therefore Asteco has tried to solicit clarity on this subject with both parties, with no concrete answer forthcoming.

“As managers with insight and expertise in our field we have a duty of due diligence on behalf of the OAs to protect the industry to be treated equitably in terms of VAT. We are asking authorities for consultation and to provide substantiation of any decisions regarding OAs and VAT,” said Nicholas White, Associate Director, Asteco Owners Association.