Two senior officials from the UAE Ministry of Finance and the Federal Tax Authority (FTA) stressed in a media briefing held in Abu Dhabi this week that there will be no exceptions for banks or insurance companies with regard to the VAT launch date.
“The banking industry is based on advanced electronic systems and all the required information was available to them, so there is no reason to postpone the tax,” Khalid Al Bustani, the director-general of the FTA told reporters.
“All banks have registered and most banks have sent messages to their clients to inform them that they will start collecting VAT at the beginning of next year,” he said, speaking in Arabic. However, he declined to confirm whether all insurance firms had registered.
Abdul Aziz Al Ghurair, chairman of the UAE Banks Federation, said in November that banks and insurance firms need at least six more months to be ready for VAT and urged authorities to extend the time for them.
In response, Younis Al Khouri, an under-secretary at the Ministry of Finance, told reporters: “We had a meeting last week with some banks to inquire about this issue, and they confirmed their readiness for VAT.”
Al Bustani said that the UAE had announced the VAT launch date last year, after signing a treaty with other Gulf Cooperation Council countries. The Ministry of Finance has also conducted a number of workshops to clarify the VAT regulations, targeting various sectors.
“For the banking sector, the law was clear that there will be two types of tax treatment: the services with margins or interests will be exempt, while other services will be subject to VAT,” he said.
“Banks were aware of this (a) long time ago and these services are regulated by the UAE central bank. So all that is requested from them is to add 5 percent on these services,” he said, adding that “the only reason for any entity not being ready for VAT is that it needs to put in more effort to speed up executing tax-related procedures”.
All six GCC countries agreed to impose a 5 percent VAT rate on a number of goods and services last year, but so far only the UAE and Saudi Arabia have announced that they will implement the tax on January 1, 2018.