VAT Fines and Penalties in the UAE
Federal Tax Authority has imposed VAT Fines and Penalties in UAE for violations about Value Added Tax laws. To avoid VAT penalties, and effectively ensure compliance, businesses in the UAE are encouraged to seek the expert services of premier Vat Consultants in UAE. VAT Registration UAE, based in Dubai is a reputable Tax Consultant committed to assisting Taxable Persons to meet VAT requirements and ensure compliance.
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Federal Tax Authority penalties for VAT non-compliance include the following:
The VAT registration costs in UAE are minimal and Every business is required to register for VAT, and late registration leads to a penalty of 10 thousand United Arab Emirates dirham. Once the business can confirm that on average their annual turnover is above AED 375000 or will exceed in the next month then they have to register for VAT. Also, Failure to submit data, documents, and records that are related to taxation to authority when the FTA requests them is fines for AED 20,000.
AED 10,000 is charged in case there has been a failure of a VAT-registered business in submitting an application for VAT registration cancellation in the timeframe that is specified by the FTA
the FTA charges a fine of AED 5000 in case of failure of a taxable person to inform the FTA regarding circumstances that require amendment of information that pertains to tax records that are kept by the tax authority. This is valid in case it’s the first offense done by the business.
A fine of AED 20000 is applicable for the cases where a legal representative of a VAT-registered business fails to inform authority regarding an appointment within the timeframe specified by the FTA. Penalties will be taken from the funds of the legal representative. Also, a fine of AED 1000 is applicable in case of Failure of an appointed legal representative for a registered business to file tax returns within a timeframe specified by the FTA. Again, this fine has to be paid from the funds of the legal representative and subsequent faults will be subject to a fine of AED 2000 if it’s done within 24 months.
Should a VAT return be filed after the due date which is the 28th of the month after the tax period, the FTA of UAE will charge AED 1,000 as a penalty. Otherwise, if one commits the same offense again and within 24 months, then the fines are escalations to accrued up to AED 2,000. You can also be charged extra for any overdue taxes and potential interest. You are advised to avoid frequent errors or inaccurate data as in such cases FTA will call for an audit and the audit procedures are costly and time-consuming.
The Tax Procedures Law stipulates that the first infraction is punishable by ten thousand AED. This penalty arises where a taxpayer has failed to issue correct tax invoices and where the required records have not been kept correctly for the specified period. The fine amount is doubled to AED 50000 if the same offense is repeated within a period of 24 months.
if the taxable person voluntarily discloses his mistakes to FTA in the tax returns, then two penalties will be applicable: a fixed penalty of AED 1000 for the 1st default and AED 2000 for each consecutive defaults. A proportion based on the amount owing to the FTA as a result of an error or generating a tax benefit. This is 50% if the taxable person fails to make a voluntary disclosure, or if the business discloses voluntarily after being notified of a tax audit and the FTA has initiated the VAT audit process, or after the VAT-registered business is asked to furnish information regarding a tax audit.
Take note: An amendment to an administrative penalty whether deletion, addition, or amendment will be made by the Cabinet. A taxable person or VAT-registered business in UAE has the right to objecting an administrative penalty that is imposed by the FTA in accordance to procedures that are specified in Tax Procedures Federal Law of 2017 No 7.
| VAT Violation | Penalties (AED) |
|---|---|
| Failure to maintain records | 10,000 (1st); 50,000 (subsequent) |
| Non-submission of requested documents | 20,000 |
| Late VAT registration | 20,000 |
| Late cancellation of VAT registration | 10,000 |
| Late amendment of tax record information | 5,000 (1st); 15,000 (subsequent) |
| Legal representative’s late notification | 20,000 |
| Legal representative’s late tax return filing | 1,000 (1st); 2,000 (subsequent) |
| Late tax return submission | 1,000 (1st); 2,000 (subsequent) |
| Late tax payment | 2% immediately; 4% after 7 days; 1% daily after a month, up to 300% |
| Incorrect tax return | Fixed 3,000 (1st); 5,000 (subsequent); additional percentage penalties |
| Voluntary disclosure errors | Fixed 3,000 (1st); 5,000 (subsequent); additional percentage penalties |
This table highlights the key penalties associated with various VAT compliance issues.
To avert VAT penalties and ensure effective compliance, businesses in the UAE are encouraged to seek the services of premier tax consultants. VAT Registration UAE, based in Dubai, is a reputable tax consultant committed to assisting taxable persons in meeting VAT requirements and ensuring compliance. Thus, contact us today and we shall be glad to assist you.