VAT Compliance Increases in the UAE, But Violations Surge Amidst Federal Tax Authority Crackdown

Compliance with UAE's excise and value-added tax (VAT) laws has more than doubled in the first half of the year, yet violations have also risen sharply, according to the Federal Tax Authority (FTA).

In the first six months of 2024, 30,710 establishments were found compliant with tax policies, marking an 111 per cent increase from 14,540 in the same period last year. Conversely, violations surged from 1,740 to 6,210, reflecting a 256 per cent rise.

During this period, the FTA conducted 40,580 field inspections across 109 campaigns nationwide, a significant increase from 17,310 inspections in 105 campaigns during the same period in 2023.

The FTA confiscated 7.26 million products failing to meet tax obligations in the first half of the year. This included 5.52 million packs of tobacco and 1.74 million units of other excise goods, such as soft drinks, energy drinks, and sweetened beverages.

Khalid Ali Al Bustani, FTA Director-General, emphasised the Authority's intensified efforts to improve market oversight, ensure compliance with tax laws, and prevent the sale of contraband products in UAE markets.

“The Federal Tax Authority is committed to enhancing compliance rates with tax legislation and procedures, which define clear obligations for both the Authority and taxpayers while safeguarding consumer interests.”

Sara AlHabshi, Executive Director of the Tax Affairs Sector at the FTA, highlighted the role of advanced electronic monitoring in curbing the sale, trade, and storage of non-compliant products.

“Our advanced monitoring processes, including the ‘Marking Tobacco and Tobacco Products Scheme,’ which has evolved over the past five years, require Digital Tax Stamps on tobacco packages.

These stamps are electronically registered and can be read by authorised inspectors to verify tax payment.”

“All indicators show that the Authority's inspection campaigns have yielded positive results,” AlHabshi stated.

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