Businesses in the UAE are required to make their VAT payments and file VAT returns on time. By the deadline, usually the 28th day of the month after the end of the tax period, VAT returns must be submitted, and the relevant tax must be paid. VAT Late Payment Penalty in UAE may be imposed if this deadline is missed. A fixed penalty and a daily penalty are both included in the penalty for VAT late payment. Thus, it is highly advisable for businesses to seek the expert services of “VAT Registration UAE” to effectively ensure compliance with timely payment of VAT.
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Vat Late Payment Penalty
VAT Returns must be submitted before the deadline, or a penalty of AED 1,000 will be assessed for delays that occur for the first time. If multiple violations occur within 24 months, the fine will be doubled to AED 2,000 for each violation. The FTA may share a tax assessment with an estimate of the owed tax for failure to file a VAT Return by the deadline. Upon the issuance of the tax assessment (where applicable), the Taxable Person will be required to pay any payable taxes assessed, penalties for failure to file a tax return, and late payment penalties.
The Taxable Person shall pay the VAT late payment penalty of the payable tax up to a maximum of (300%) in accordance with the following:
- Once the payment of the payable tax is past due, 2% of the unpaid tax is due on the day after that date.
- A monthly penalty of 4% will be applied to the outstanding balance on the same day every month starting one month after the payment is due.
- For any confusion in terms of the amount due for late payment, businesses should always consult the VAT consultants in the UAE.
Not sure what that means? Book a consultation with VAT expert.
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How to Avoid VAT Late Payment Penalty?
Businesses in the UAE must adopt the following best practices to prevent VAT late payment penalties:
- Maintain Accurate Records: Make sure your books are current and keep precise records of all transactions.
- Maintain Knowledge: Keep up with any FTA and VAT law changes. Knowing the requirements makes compliance much simpler.
- Timely Submission of VAT Returns: Submit your VAT returns on time and with accuracy. Make sure you have the money on hand to pay your VAT obligation on the due date.
- Seek Professional Advice: If you need more clarification on any part of VAT compliance, it is advisable to consult tax experts or consultants who are familiar with UAE tax legislation for guidance.
- Invest in VAT accounting software or engage an accountant who can assist you with VAT compliance to use it. These tools can speed up the procedure and lower the possibility of mistakes.
Late VAT payments can affect your business’s profits very significantly. Therefore, it is always advisable to seek help from the VAT consultants in Dubai to ensure that you are making your VAT payments on time.
Consult “VAT Registration UAE“
It is highly advisable for businesses to seek the expert services of VAT Registration UAE to effectively ensure compliance with timely payment of VAT and avert penalties. Therefore, contact us today and we shall be glad to assist you.
To regulate the VAT flow cycle, the Federal Tax Authority has a list of circumstances where businesses have to comply. In the case of non-compliance they can bring themselves in a situation where they will have to pay serious penalties and fines leading towards a financial jeopardy.
After the COVID 19 hit the world with its ruthless impacts, Federal Tax Authority of UAE revised its penalty policies and amended the penalties by reducing them to encourage businesses do the VAT Return Filing timely and avoid VAT late filing penalty in UAE. The amended policies are in effect from June 2021 till date in UAE.
Read More: Penalty For Voluntary VAT Disclosure In UAE
Other Circumstances Lead Companies to be Subject to VAT penalties
The circumstances which denote violations of VAT accounting in UAE are listed as below:
- Late registration of VAT
- Late De-registration of VAT
- Not keeping the financial records such as tax invoices and account books as instructed by the tax law
- Not submitting documents in Arabic when required by Federal Tax Authority
- Filing incorrect VAT return
- Late VAT payment
- Late filing of tax return
- In case of any errors in a tax refund or tax return by a business, submitting the VAT Voluntary disclosure
- Failing to issue tax credit note or alternative document
- Incorrect VAT returns penalty filing
- Failing to facilitate tasks carried out by FTA tax auditor
- Following incorrect format of tax
- Failing to voluntarily disclose errors in a tax return or tax refund application before tax audit happens
- Failing to account for tax due on import of goods as per the tax law
- Failing to notify Federal Tax Authority for applying tax based on the margin
- Failing to comply with conditions & procedures relevant to the transfer of goods in designated zones
- When making a supply, failing to issue a tax invoice or an alternative document
- Failing to comply with the conditions & procedures relevant with the issuance of electronic tax invoices and electronic tax credit notes
- Not displaying tax inclusive prices on tax invoice
Also Read: VAT Fines And Penalties In UAE
How does VAT Accounting and VAT Filing affect businesses?
VAT accounting is a very thorough and intricate process for any business in UAE. In case of breach of VAT laws, businesses are subject to face heavy penalties and fines by the Federal Tax Authority of UAE. Therefore companies must stay in compliance with Federal Tax Authority in regard with VAT filing. It is also best to consult with a tax expert in UAE or partner with a tax consultancy firm for the ongoing tax accounting matters in the business.