VAT in UAE: Administrative Penalties and Violations

Fines and penalties for violations pertaining to Value Added Tax laws are imposed by the Federal Tax Authority. A business in UAE has to abide by the regulations that are set by the FTA to avoid hefty administrative penalties. The FTA will only fine the businesses that have breached VAT laws, which is why it is extremely crucial for business owners, especially those running SMEs and startups in UAE, to consult with regulated tax agents in UAE prior to the implementation of VAT within the organization.

The administrative punishments will be imposed as per the VAT violations that are listed below

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.

Table of Administrative Penalties for VAT Violations

Description of the VAT ViolationAdministrative Penalties in AED
Failure of the taxable person that’s conducting business to maintain required records of transactions that are specified in tax laws10,000 for the 1st offense and 50,000 for the second offense

 

Failure in submitting data, documents, and records that are related to taxation to authority when the FTA requests for them20,000

 

Failure of the VAT-registered business to present an application for registration within the time frame that is specified by the FTA20,000
Failure of a VAT-registered business in submitting an application for VAT registration cancellation in the timeframe that is specified by the FTA10,000

 

Failure of a taxable person in informing the FTA regarding circumstances that require amendment of information that pertains to tax records which are kept by the tax authority5,000 for 1st offense and 15,000 for the 2nd offense

 

Failure of an appointed legal representative of a VAT-registered business to inform authority regarding appointment within the timeframe specified by the FTA. Penalties will be taken from the funds of the legal representative20,000

 

Failure of an appointed legal representative for a registered business to file tax returns within a timeframe specified by the FTA. The penalties will be taken from the funds of the legal representative1,000 for the 1st offense and 2,000 for the 2nd offense in 24 months

 

Failure of a registrant in submitting a tax return that’s within a timeframe specified in UAE tax laws1,000 for the 1st offense and 2,000 for the 2nd offense in 24 months

 

Failure of a VAT-registered business to pay the payable tax that is stated in a tax return or assessment submitted or was notified of in the timeframe that’s specified by the authority

 

The taxable person will be required to settle the late payment penalty which consists of the following:

– two percent of the tax unpaid which is due as soon as the payment for payable tax hasn’t been paid on time;

– four percent that’s due on the 7th day following the deadline for payment;

– 1 percent daily penalty taht is charged for any amount that’s left unpaid a calendar month after the payment deadline with a ceiling of 300%

Submittal of incorrect tax returns by a VAT-registered business

 

Two penalties will be applied

1. A fixed penalty of 3,000 for the 1st offense and 5,000 for the 2nd offense

2. A percentage that’s based on amount that is unpaid to the FTA from the error or resulting to a tax benefit

– fifty percent if the taxable person doesn’t make a disclosure done voluntarily or the business made a voluntary disclosure following being provided a notification regarding a tax audit and FTA has started process for VAT audit or after the VAT-registered business was requested to provide information in relation to tax audit

– thirty percent if the taxable person provides a voluntary disclosure following notification for tax audit prior to FTA starting the tax audit

– five percent if the taxable person provides a voluntary disclosure prior to being notified by FTA regarding a tax audit

Voluntary disclosure by taxable person on mistakes in tax returns, refund application or tax assessment as per the UAE tax procedures law

 

Two penalties will be applied

1. A fixed penalty of 3,000 for the 1st offense and 5,000 for the 2nd offense

2. A percentage that’s based on amount that is unpaid to the FTA from the error or resulting to a tax benefit

– fifty percent if the taxable person doesn’t make a disclosure done voluntarily or the business made a voluntary disclosure following being provided notification regarding a tax audit and FTA has started the process for VAT audit or after the VAT-registered business was requested to provide information in relation to tax audit

– thirty percent if the taxable person provides a voluntary disclosure following notification for tax audit prior to FTA starting the tax audit

– five percent if the taxable person provides a voluntary disclosure prior to being notified by FTA regarding a tax audit

If you have questions regarding VAT in UAE, don’t hesitate to reach out to us at VAT Registration UAE! Our regulated tax agents in UAE are able to help you deal with and/or prevent administrative penalties for VAT in UAE. Call us today so we can address all of your questions and concerns.