Understanding the Federal Tax Authority’s Role in UAE Tax Compliance

Federal Tax Authority

The UAE’s tax landscape has undergone significant changes in recent years, introducing various tax regulations to diversify the economy and enhance fiscal sustainability. Central to this transformation is the Federal Tax Authority (FTA), the entity responsible for administrating and enforcing tax laws in the UAE. Understanding the role of the FTA is essential for businesses to gurantee compliance and optimize their tax strategies. This blog delves into the FTA’s functions, business impact, and essential compliance requirements.

The Establishment and Purpose of the FTA

The FTA was established in 2017 under Federal Law No. 7 of 2017, marking a significant shift in the UAE’s approach to taxation. The primary purpose of the FTA is to manage and collect federal taxes, including Value Added Tax VAT Registration and Excise Tax. By doing so, the FTA aims to diversify the government’s revenue sources beyond oil and gas, fostering economic stability and sustainability.

Critical Functions of the FTA

1. Administration of Tax Laws:

The FTA administers VAT and Excise Tax laws, ensuring businesses adhere to tax regulations. This includes issuing tax guidelines, public clarifications, and detailed procedural regulations to assist companies in understanding and complying with tax obligations.

2. Tax Registration and Deregistration:

The FTA handles the registration and deregistration of businesses for VAT and Excise Tax. Businesses meeting the mandatory registration threshold must register with the FTA to comply with tax laws. The FTA also facilitates voluntary registration for entities below the threshold.

3. Tax Collection and Refunds:

The FTA collects taxes and processes refunds. Businesses must submit periodic tax returns and payments through the FTA’s online portal. The authority also manages the refund process for eligible firms, ensuring a streamlined and efficient system.

4. Tax Audits and Enforcement:

The FTA conducts tax audits and investigations to ensure compliance. Businesses need to maintain up-to-date records and documentation to support their tax filings. The FTA can impose penalties for non-compliance, inaccuracies, and late submissions, reinforcing the importance of adhering to tax laws.


  1. Public Awareness and Education:

FTA is vital in educating businesses and the public about tax regulations. The FTA aims to enhance understanding and foster voluntary compliance through workshops, seminars, and online resources. Information is available from the FTA E-services portal.

Impact on Businesses

The introduction of the FTA and new tax regulations has significantly impacted businesses in the UAE. Companies must now navigate a complex tax environment, ensuring accurate reporting and timely payments. The FTA’s stringent compliance measures mean companies must invest in robust accounting systems and professional tax advice to avoid penalties and optimize their tax positions.

1. Increased Administrative Burden:

Complying with VAT and Excise Tax regulations requires meticulous record-keeping and regular tax return filing. Businesses need to allocate resources to manage these tasks efficiently.

2. Cost Implications:

While implementing taxes increases operational costs, proper compliance and strategic planning can mitigate some of these expenses. Businesses may also incur fees for professional advice, accounting software, and tax accounting services in UAE.

3. Enhanced Transparency:

The FTA’s regulations promote greater transparency and accountability in business Standard Operating Procedures. This shift can improve investor confidence and contribute to a more robust economic environment.

Essential Compliance Requirements

1. Accurate Record-Keeping:

For at least five years, businesses must maintain comprehensive records of all transactions, including invoices, receipts, and financial statements. These records should be readily available for audit purposes.

 2. Timely Filing of Returns:

VAT returns must be filed quarterly, while Excise Tax returns are generally monthly. Submissions must be on time to avoid penalties, so businesses must adhere to the specified deadlines.

3. Correct Tax Invoicing:

Businesses must include specific information in their invoices, such as the VAT registration number, tax amount, and total payable. Ensuring compliance with invoicing requirements is crucial for accurate tax reporting.

4. Staying Informed:

Tax laws and regulations can evolve, and businesses must stay informed about any changes. Regularly reviewing FTA updates and attending relevant seminars can help enterprises to remain compliant.


The Federal Tax Authority is pivotal in shaping the UAE’s tax landscape. By understanding the FTA’s functions and compliance requirements, businesses can navigate the complexities of the tax system effectively. Ensuring proper tax management helps avoid penalties and improves businesses’ overall financial health and transparency. As the UAE continues to develop its fiscal policies, staying compliant with FTA regulations will be crucial for sustainable business operations.