In order to facilitate filings of accurate tax returns in UAE by the 27th of June, 2021, the Federal Tax Authority (FTA) announced relief for businesses through reduced penalties. Sixteen kinds of administrative penalties are reduced to support all tax registrants for them to fulfill their respective tax obligations.
The method for calculating penalties has also been amended under Cabinet Decision (no. 49). The new amendment is scheduled to take effect on the 28th of June, 2021, and will significantly reduce several administrative penalties that are imposed on violations of tax laws. A late payment penalty won’t be imposed as well on voluntary disclosures should the payment be settled in no more than twenty days from the submission of voluntary disclosure.
What are the amendments made to administrative penalties for tax violations?
The new cabinet resolution amends administrative penalties for tax violations. Key amendments listed in the recently issued resolution are the following:
- Dhs 10,000 reduced to Dhs 1,000 per month (not exceeding Dhs 10,000) applicable for the failure of registrant in submitting an application for VAT cancellation in UAE within the timeframe that was specified by the UAE VAT law
- Dhs 20,000 reduced to Dhs 10,000 applicable for the failure of a VAT-registered business to submit an application for VAT registration in UAE within the allocated timeframe that was specified in UAE VAT law
- Dhs 15,00 reduced to Dhs 5,000 applicable for the failure of a registered business to display prices of goods and services inclusive of VAT
- Dhs 5,000 for every tax invoice reduced to Dhs 2,000 for every instance discovered applicable for the failure of a registered business to issue a tax credit note or tax invoice or any alternative document for making a supply
- Dhs 5,000 for every tax invoice reduced to Dhs 2,500 for every instance discovered applicable for the failure of a registered business in complying with procedures and conditions with respect to the issuance of an electronic tax credit note or electronic tax invoice
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Percentage-based penalties that are applicable to late payment of due tax (involuntary disclosure, tax assessment, or tax return) are reduced and one percent daily penalty imposed previously is eliminated. New late payment fine is now calculated as follows:
Note: three hundred percent cap is still applicable
- Two percent form unpaid tax due the day following a payment’s due date
- Four percent penalty that’s due after a month from payment’s due date, as well as on same day each month thereafter on amount of tax left unpaid to date
Voluntary disclosure penalties applicable to the difference between the tax due and tax declared are now linked to a period in which taxpayers amend previously submitted tax returns. The range is between five percent for voluntary disclosure that was submitted a year from a tax return due date and forty percent for voluntary disclosure submitted after the fourth year.
The director-general of the FTA calls upon all tax registrants in UAE to immediately take advantage of important benefits that are provided to them by the new resolution. It will provide relief to all business sectors and support the effective contribution of businesses to boosting the growth of the national economy.
As part of the local tax authority’s ongoing and active awareness-raising efforts, it issued two detailed public clarifications regarding the amendment on the official website. The public clarifications are aimed at familiarizing all tax registrants with tax aspects that need simplified and clear explanations, enabling businesses in applying the tax principles efficiently and accurately. Consult with regulated tax agents in Dubai for further clarification on the new amendment.
How are penalties calculated?
The new cabinet resolution stipulated payment due date to calculate late payment penalty will be as follows:
- Twenty business days from the date of voluntary disclosure application submission
- Twenty business days from the date of receipt for a tax assessment
The above will override the application for late payment penalty from the due date of tax return filing subject to assessment or amendment
Read also: How VAT In UAE Affects Small Businesses?
What are the discounts for previously imposed administrative penalties?
Administrative penalties that were left unpaid and imposed prior to the effective date for the new resolution are to be reduced to thirty percent of the total unpaid penalties should the conditions listed below are met.
- Registrant paid all taxes that are due by the 31t of December 2021
- Penalties were applied as per the previous Cabinet Resolution (no 40) of 2017
- The registrant, by the 31st of December 2021, paid thirty percent of demonstrative penalties due
VAT-registered businesses in UAE can greatly benefit from the savings which can be derived from the reduced administrative fines for tax violations. Taxpayers are advised by the FTA to evaluate the conditions that are stipulated in the resolution to benefit from penalty reductions.
To know more, talk to the regulated tax agents of VAT Registration UAE today!