List of VAT Penalties and Fines in the UAE
The UAE introduced its Value Added Tax (VAT) system on January 1, 2018, with a standard rate of 5%. Businesses that exceed an annual taxable supply threshold of AED 375,000 must register for VAT and follow all Federal Tax Authority (FTA) regulations. The FTA imposes penalties and fines on businesses for non-compliance, including late registration, inaccurate returns, and non-payment of VAT. These measures are intended to enforce tax compliance and enhance business accountability in the UAE. This article provides a simple and clear list of VAT penalties and fines in the UAE. It will help you understand the common mistakes and their costs.
In the UAE, businesses that generate taxable supplies above AED 375,000 must register for VAT but businesses with taxable supplies above AED 187,500 have the option to register voluntarily. The Federal Tax Authority (FTA) operates as the governing body for VAT while enforcing strict compliance regulations which include:
VAT Return Filing: Taxable businesses must file VAT returns with FTA on a regular basis within the tax period. A ‘tax period’ is a specific period of time for which the payable tax shall be calculated and paid. The standard tax period is:
The FTA may, at its choice, assign a different tax period for certain types of businesses.
Failure to file a tax return within the specified time frame will make the violator liable for fines as per the provisions of Cabinet Resolution No. 40 of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE.
VAT Payments: Once the business has registered for VAT in the UAE, they are required to file their VAT return and make related VAT payments within 28 days from the end of the tax period.
Read Also: Key Aspects of VAT Compliance for Businesses in UAE
Below is a detailed list of VAT penalties and fines in the UAE, including the latest regulations:
| No. | Description of Violation | Administrative Penalty (AED) |
| 1 | Failure to keep required tax records and other information | 10,000 for the first time 20,000 in case of repetition |
| 2 | Failure to provide tax records and documents in Arabic when requested | 20,000 |
| 3 | Failure to submit a tax registration application on time | 10,000 |
| 4 | Failure to submit a tax deregistration application on time. | 1,000 for the first month of delay, then 1,000 monthly (up to 10,000 maximum) |
| 5 | Failure to update the Authority about changes to tax information. | 5,000 for the first time 10,000 in case of repetition |
| 6 | Failure of the Legal Representative to inform the Authority of their appointment. | 10,000 (payable by the Legal Representative) |
| 7 | Failure of the Legal Representative to submit a Tax Return on time. | 1,000 for the first time. 2,000 for repetition within 24 months (payable by the Legal Representative) |
| 8 | Failure of the Registrant to submit the Tax Return on time. | 1,000 for the first time 2,000 for repetition within 24 months |
| 9 | Failure to pay the due tax on time. | 2% of unpaid tax immediately after the due date 4% monthly thereafter (up to 300% maximum) For voluntary disclosure or tax assessment: payment is due within 20 business days |
| 10 | Submitting an incorrect Tax Return. | 1,000 for the first time 2,000 for repetition If the tax difference is less than these amounts, a penalty equal to the difference (minimum 500 AED) applies. No penalty if corrected before the due date |
| 11 | Submitting a Voluntary Disclosure of errors in Tax Return, Tax Assessment, or refund application | Percentage penalty on the tax difference: 5% (within 1 year), 10% (within 2 years), 20% (within 3 years), 30% (within 4 years), 40% (after 4 years) |
| 12 | Failure to disclose errors before a Tax Audit notification | 50% of the tax error amount plus 4% monthly penalty from the due date until payment |
| 13 | Failure to assist the Tax Auditor | 20,000 |
| 14 | Failure to calculate and pay tax on behalf of another person when required. | Same penalty as late payment: 2% of unpaid tax after the due date and 4% monthly thereafter (up to 300% maximum). Payment due within 20 business days for voluntary disclosures or tax assessments |
| 15 | Failure to account for tax on imported goods. | 50% of unpaid or undeclared tax |
The FTA allows businesses to request penalty waivers or to pay penalties in installments:
To know more about VAT penalty waiver it is advisable to connect our VAT Consultants.
Following VAT rules is important to avoid penalties and legal problems. It also helps your business run smoothly without interruptions. Keeping accurate records and paying VAT on time will help you stay compliant. Regular updates on VAT laws are also necessary to avoid mistakes.
It is often very difficult to understand and comply with VAT penalties and fines in the UAE. VAT Registration UAE can help you stay compliant and avoid fines. Our services include:
Let VAT Registration UAE can support your business with all VAT related needs. Contact us today to ensure that you meet all VAT obligations and avoid penalties.