VAT Penalties in UAE

Federal Tax Procedures Law and Federal Decree-Law on VAT provide for VAT penalties / VAT administrative penalties in UAE. Every business in the UAE must be familiar with VAT Laws and comply with its provisions to contribute towards the nation’s growth and avoid VAT penalties.

VAT Administrative Penalties in UAE

Violations and administrative penalties related to the implementation of the Federal Law No. (7) of 2017 on tax procedures:

1. Failure to keep the required records and other information specified in the Tax Law:
   • AED 10,000 for the first time
   • AED 50,000 in case of repetition
2. Failure to submit the data, records, and documents related to Tax in Arabic to the Federal Tax Authority when requested:
   • AED 20,000
3. Failure to submit a registration application within the specified timeframe:
   • AED 20,000
4. Failure of the registered business to submit a deregistration application within the specified timeframe:
   • AED 10,000
5. Failure of the registered business to inform the FTA of any circumstance that requires the amendment of the information pertaining to his tax record kept by the Authority:
   • AED 5,000 for the first time
   • AED 15,000 in case of repetition
6. Failure of the person appointed as a legal representative for the taxable person to inform the Authority of his appointment within the specified timeframe. This penalty will be due from the legal representative’s own funds:
   • AED 20,000
7. Failure of the person appointed as a legal representative for the taxable person to file a Tax Return within the specified timeframe. The penalty will be due from the legal representative’s own funds:
   • AED 1,000 for the first time
   • AED 2,000 in case of repetition within (24) months
8. Failure of the Registrant to submit the tax return within the timeframe specified in the tax law:
   • AED 1,000 for the first time
   • AED 2000 in case of repetition within (24) months
9. Late payment penalty (Payable Tax stated in the submitted tax return or tax assessment):
   • 2% of unpaid tax is due immediately
   • 4% is due on the seventh day following the deadline for payment
   • 1% daily penalty on any amount that is still unpaid one calendar month following the deadline for payment (max 300%)
10. Incorrect tax return by the taxable business. Two penalties are applied:

Fixed Penalty

• AED 3,000 for the first time
• AED 5,000 in case of repetition

% Based Penalty

% based penalty shall be applied on the amount unpaid to the Authority due to the error and resulting in a tax benefit as follows:

• 50% if the registered business does not make a voluntary disclosure or he makes the disclosure after being notified of the tax audit, and the Authority has started the tax audit process, or after being asked for information relating to the tax audit, whichever takes place first
  • 30% if the registered business  makes the voluntary disclosure after being notified of the tax audit and before the Authority starts the tax audit
  • 5% if the registered business makes a voluntary disclosure before being notified of the tax audit by the Authority.

11. The voluntary disclosure by the person/taxpayer of errors in the tax return, tax assessment, or refund applicable pursuant to Article 10 (1) and (2) of the Tax Procedures Law. Two Penalties are applied:

Fixed Penalty

• AED 3,000 for the first time
• AED 5,000 in case of repetition

% Based Penalty

% based penalty shall be applied on the amount unpaid to the Authority due to the error and resulting in a tax benefit as follows:

• 50% if the Person/Taxpayer make as voluntary disclosure after being notified of the tax audit and Authority starting the tax audit or after being asked for information relating to the tax audit, whichever takes place first
• 30% if the Person/Taxpayer makes the voluntary disclosure after being notified of the tax audit but before the start of the tax audit
• 5% if the Person/Taxpayer makes a voluntary disclosure before being notified of the tax audit by the Authority.

12. The failure of the Taxable Person to voluntarily disclose errors in the tax return, tax assessment or refund application pursuant to Article 10 (1) and (2) of the Tax Procedures Law before being notified that he will be subject to a tax audit. Two penalties are applied:

Fixed Penalty

• AED 3,000 for the first time
• AED 5,000 in case of repetition

% Based Penalty

• 50% of the amount unpaid to the Authority due to the error resulting in a tax benefit for the person/Taxpayer

13. The failure of the business conducting business to facilitate the work of Tax Auditor in violation of the provisions of Article (21) of the Tax Procedures Law:

• AED 20,000

14. The failure of the Registrant to calculate tax on behalf of another person when the registered taxable person is obliged to do so under the Tax Law. The Registrant shall be obliged to pay a late penalty consisting of:

• 2% of the unpaid tax due immediately once the payment of payable tax is late
• 4% is due on the seventh day following the deadline for payment, on the amount of tax which is unpaid
• 1% daily penalty charged on any amount that is still unpaid one calendar month following the deadline for payment with an upper ceiling of 300%

15. A person not accounting for any tax that may be due on the import of goods as required under the law:

• 50% of unpaid or undeclared tax

Violations and administrative penalties related to the implementation of the Federal Decree-Law No. (8) of 2017 on Value Added Tax (VAT):

• Failure by the Taxable Person to display price inclusive of Tax:
  • AED 15,000
• Failure by the Taxable Person to notify the Authority of applying tax based on margin:
  • AED 2,500
• Failure to comply with conditions and procedures related to keeping the goods in a Designated Zone or moving them to another Designated Zone:
  • The penalty shall be the higher of AED 50,000 or 50% of the tax if any, chargeable in respect of the goods as the result of the violation
• Failure by the Taxable Person to issue the Tax Invoice or an alternative document when making any supply:
  • AED 5,000 for each tax invoice or alternative document:
• Failure by the Taxable Person to issue a Tax Credit Note or an alternative document:
  • AED 5,000 for each tax credit note or alternative document
• Failure by the Taxable Person to comply with the conditions and procedures regarding the issuance of electronic Tax Invoices and electronic Tax Credit Notes:
  • AED 5,000 for each incorrect document

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VAT Services in UAE

N R Doshi & Partners is a Registered Tax Agent with the Federal Tax Authority in UAE. We provide VAT Consulting Service, which complements our other services, including, Company Formation, Advisory Services, Accounting and Finance, and Outsourcing. It enables us to provide a total solution to our clients so that they can remain compliant and avoid VAT penalties.

Our VAT Consultants in UAE are experienced in your industry and provide a practical solution. They also handle your routine compliance issues starting from VAT Registration, VAT-compliant Bookkeeping, VAT Return Filing, VAT Implementation, Voluntary Disclosure Filing, VAT Audit, Tax Agent Services, TRN Verification, and VAT De-registration.

Our VAT Services in UAE aims to provide the expertise you need to deal with UAE VAT Laws. Contact Us now to proceed towards the right direction in your journey of VAT Compliance and avoiding VAT Penalties.

Source: https://nrdoshi.ae/vat-penalties-in-uae/