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The Federal Tax Authority (FTA) is invested in facilitating procedures for the Value Added Tax (VAT) Recovery on the Building of New Residences by UAE Nationals programme, asserted His Excellency Khalid Ali Al Bustani, FTA Director General, at a discussion held at the Majlis of H.E. Abdullah Muhair Al Kutbi in Al Mushrif, Abu Dhabi.
Part of the Lecture Series of the Majalis Affairs Office at the Abu Dhabi Crown Prince’s Court, the session explored the subject of indirect taxes in the UAE 18 months into their implementation, bringing together a large number of citizens concerned with the implementation of the tax system, answering their queries, and listening to their suggestions for upgrading the UAE tax system and overcoming any challenges to its successful implementation.
“The VAT Recovery on the Building of New Residences by UAE Nationals programme is in line with the wise leadership’s vision to develop a modern housing system for citizens and ensure their wellbeing,” H.E. Al Bustani explained, revealing that the second quarter of 2019 witnessed significant growth in the number and value of transactions submitted by UAE nationals who’ve built new homes. More than 390 applications – worth approximately AED18 million – were submitted in Q2 2019 by UAE citizens who successfully recovered the taxes they incurred on building their homes, up from 235 application (worth AED9.76 million) submitted in Q1 2019. This amounts to a 66% growth in the number of applications received and an 84.4% increase in the value of these transactions.
The session saw great interaction from participants, answering their queries and offering them a platform to express their opinions. The FTA Director General gave a detailed explanation about the tax legislation implemented in the UAE, as well as the Authority’s tasks, objectives, and strategies; the registration procedures for VAT; the VAT Recovery on the Building of New Residences by UAE Nationals programme; and the e-Services the FTA Provides for consumers.
“The Federal Tax Authority made sure to develop simple online procedures that would allow UAE citizens to recover the VAT they incurred on building their new homes,” H.E. Al Bustani said, noting that the FTA considers the happiness of Emirati citizens to be its top priority. “We are committed to making our services accessible through the latest and most innovative electronic systems. With that in mind, we have developed clear and transparent procedures to facilitate VAT recovery on new homes built by UAE citizens.”
“In an effort to ensure stable homes for all segments of the community, UAE lawmakers were particularly keen to ease the burden on UAE nationals and expatriates alike,” H.E. explained. “To that end, regulations were enacted to ensure that residential properties were exempt from tax, except for the first supply during the first three years following its completion, which is subject to zero-rated tax. Meanwhile, the supply of commercial property – be it sale or rent – is subject to the basic VAT rate of 5%.”
The first supply of a residential building during the first three years of its completion is subject to zero-rated tax, while all subsequent supplies are exempt from tax even if made during the first three years of completion.
H.E. Al Bustani presented a detailed explanation of the taxes applied in the UAE, including 5% VAT for all sectors (one of the lowest rates in the world), with the exception of those exempt as per UAE tax laws, in addition to 100% Excise Tax for tobacco products and energy drinks, and 50% for carbonated drinks. Registration for VAT is mandatory for any natural or legal person who carries out business in case their taxable supplies exceed AED375,000 during the previous 12 months or are expected to exceed that amount in the next 30 days, H.E. noted, asserting that registration, filing Tax Returns, and paying due taxes on time by Taxable Persons are fundamental legal responsibilities to ensure that businesses comply with tax legislation.
The FTA Director General explained that according to Cabinet Resolution No. (40) of 2017 on Administrative Penalties for Violations of Tax Law in the UAE, the administrative penalties for businesses subject to VAT that have not registered include not being able to impose the tax on customers or pay tax on import prior to the disclosure of the imported goods, and the payment of the tax on all supplies made in the period in which the company was supposed to be registered. The business in question is also obliged to pay an administrative penalty for the delay in submitting registration request, and late submission of Tax Returns.
His Excellency said that under the terms of the Resolution, a Taxable Person is entitled to object in accordance with the procedures stipulated in Federal Law No. (7) of 2017 on Tax Procedures. The Person can submit an online request to the Review Committee, which, in turn, examines the application. If the Committee finds that the delay in registering for tax or submitting the Returns is due to technical reasons related to the Authority’s system and after examining the application and making sure that the Taxable Person is not responsible for the delay, the Commission then refunds the penalty.
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