VAT penalties imposed on small businesses in the United Arab Emirates (UAE) can be very serious. Consequences are grave, which is why it is best to have the right measures set in place to avoid them. Take note; VAT penalties in UAE can be imposed for various reasons. When your business fails in submitting VAT returns to the Federal Tax Authority or FTA by the deadline, then a default is going to be recorded. Failure in submitting VAT returns before the deadline will come with a hefty penalty. Before we get into the different ways in reducing your VAT penalties in UAE, let’s first look at the violations you need to avoid committing.
Common VAT Violations Committed by UAE Businesses
It’s very important for a business to be fully aware of the different kinds of violations that they can commit to ensuring that there are the right measures in place to avoid committing them at whatever cost. The most common ones are the following:
- Late VAT returns filing
- Errors or omissions in VAT returns
- Failure in notifying the FTA of any change in the policies of a company that affect the business’ liability for VAT
- Inaccuracy owing to the lack of taking reasonable care
- Wrongdoings related to VAT
Read also: Recovery Of Input VAT On The Expenses
Ways to Reduce VAT Penalties
The best way to reduce VAT penalties that may be imposed by the Federal Tax Authority in the country is by avoiding them in the first place. Keep the following tips in mind:
Set up a Proper System for VAT Accounting
Among the main reasons why businesses are given penalties is due to the failure in keeping an accurate and effective system for VAT accounting in UAE. As soon as your business has completed the process of VAT registration, it is crucial for it to have an accounting system that can handle all the different requirements and obligations of the business pertaining to VAT.
Even though keeping records updated regularly can involve a ton of manpower, paperwork, and hard work, it’s very important for everything to be documented. This is especially because the FTA will require financial records of the business. If records are maintained with accuracy and precision, then there’ll be little to no risk for a business in committing violations related to VAT in UAE.
Keep Track of Deadlines
You need to make sure that you are paying the correct amount in taxes and do so before the deadline in order to avoid being imposed with a hefty fine. The entire process of filing VAT returns in UAE may be completed with the help of regulated tax agents in Dubai. As soon as you’ve submitted your company’s VAT return, make sure that your hired expert has a receipt and retains a copy of the VAT returns submission receipt for recording.
Report Any Mistakes Uncovered
What if your accountants have made a mistake? Owing to the complicated calculations that involve VAT in UAE, errors can occur. If you have uncovered mistakes in your VAT returns, then you must rectify them immediately. If you decide that you’d rather wait until the FTA uncovers the mistakes themselves, your VAT inspector will levy even bigger penalties.
One of the most effective ways in preventing errors and/or omissions from occurring is by checking VAT accounts regularly. If possible, have them double-checked by experts. It’s recommended as well to conduct several reviews of accounts prior to submitting VAT returns. Even the slightest mistake that’s overlooked can result in a penalty.
Seek the Advice of Experts
You may have various queries related to VAT returns. If you brush them off, they might cause you to incur penalties. It’s vital for your business to be backed by a seasoned regulated tax agent in UAE as a specialist can advise and address all of your doubts and questions. If you want the other route, it would be to send your questions to the FTA to get accurate answers. Still, the FTA is not responsible for helping you complete your VAT returns so you must have a competent and professional VAT adviser who can assess your unique situation thoroughly. By having an expert’s guidance, you will have the best chance in avoiding violations and penalties.
Follow the tips we have mentioned above as they can help ensure no penalty will be imposed on your business for errors in VAT returns filing in UAE. That being said, it’s also worth noting that all businesses operating in the country are to have proper VAT policies in place. This may sound a bit tedious; however, it will prove to be highly beneficial for your business to avoid penalties.
We know you want to know more about VAT in UAE from us here in VAT Registration UAE! Contact our team of seasoned VAT specialists in UAE today!