vat penality

VAT fines and penalties in UAE

Certain VAT fines and penalties UAE are imposed when requirements of UAE VAT law are broken. Every taxpayer should be aware of the circumstances that might lead to the position of these penalties by the FTA. VAT fines are imposed in the UAE when a taxable person fails to follow the administrative procedure required by UAE tax rules and regulations.

Businesses that do not comprehend and comply with the regulations will face severe VAT fines. To avoid non-compliance concerns and severe fines, VAT-registered firms must be aware of the full spectrum of infractions of UAE VAT Law.

Ways to avoid these violations and getting penalized with VAT fines:

  • Ensure that taxable goods are properly charged by the provider and that details are included in the invoice when purchasing goods or receiving services.
  • Apply the rate to the sale value and subtract the input tax to arrive at the amount to be paid during the sale or provision of services.
  • Pay the tax that has been computed within the time frame set by the government.
  • VAT returns filing with all required information must be done to the government within the timeframe specified so that no VAT fines are levied.
  • • To justify the tax paid at the time of purchase, keep correct invoices, stock records, VAT returns, accounts, and other related data.

Circumstances that invite VAT fines and penalties in UAE

  1. Registration failure
  • Businesses must register for VAT in the UAE and should file a Tax Registration application with the FTA within 30 days after exceeding the statutory registration level.
  • Businesses that fail to register on time will face a late registration administrative penalty of AED 20,000, as well as extra penalties calculated on a percentage basis for VAT late registration penalty and non-payment of past VAT liabilities.
  1. Delay in the filing VAT return
  • At the end of each tax period, every taxable person in the UAE must file a VAT return with the FTA. The VAT Return must be received by the FTA authority no later than the 28th day after the end of the Tax Period, according to the law.
  • If a VAT registrant fails in VAT Return filing within the FTA’s specified term, VAT fines of AED 1,000 will be imposed. In addition, if the defaulter commits the same act again within 24 months, he or she will be fined AED 2,000.
  1. Failure in maintaining the books of records
  • FTA has mandated for businesses keep accurate records of transactions and substantiating papers. Documents that are relevant to the tax audit must be submitted at the time of the audit or whenever the FTA requests them.
  • VAT fines and penalties in UAE of AED 10,000 will be levied for the first time if a person running a business fails to present the important accounting documents of their business. If the same person is found in breach of the legislation for the second time, the fine imposed will be of a fine of AED 50,000.
  1. VAT payment delay
  • Businesses in the UAE are required to pay their VAT by the return deadline or return filing deadline.
  • The registrant is subject to VAT fines in case of the following late payment: Once a payment is late, 2% of the unpaid tax is required immediately, and any amount that is still overdue one calendar month after the deadline for payment will be assessed a 1% daily penalty, up to a maximum of 300%.
  1. Failure to indicate VAT inclusive prices for goods
  • Under UAE VAT, certain scenarios require that the price of goods or services displayed in their shops or offices include VAT.
  • Failure to display the prices of products or services as inclusive of tax would result in an AED 15,000 of VAT fines and penalties in UAE.
  1. Incorrect tax return filing
  • If you submit an incorrect tax return the first time, you will be fined AED 3,000, and if you make the same mistake again, you will be fined AED 5,000.
  • VAT fines may be imposed based on the proportion of the tax amount not paid to the tax authorities owing to the submission error, which can range from 5% to 50%, depending on how early the submitter notifies the error in relation to the Authority’s tax audit.
  1. Failure to issue a tax invoice or a tax credit note
  • A supplier must submit a suitable tax invoice or tax credit note to the customer who is responsible for VAT payment.
  • If the supplier fails to follow this method while issuing electronic tax invoices and electronic tax credit notes, VAT fines and penalties in UAE of AED 5,000 will be imposed for each inaccurate document.
  1. Failure to de-register
  • Individuals and businesses that have registered for VAT can de-register if their annual turnover or taxable expense does not exceed the threshold amount 13 months after registering.
  • Failure to apply for required de-registration within the specified term, i.e. within 20 working business days (after the occurrence of the event that makes the taxpayer entity eligible for de-registration), would result in VAT fines of AED 10,000.

What circumstances invite VAT penalty waiver UAE?

According to the following laws, the Federal Tax Authority may decrease or waive any administrative penalty imposed on any person whose violation of the Law or Tax Law has been proven:

  1. The person has a valid excuse that the authority can accept.
  2. The person offers evidence to support the excuse and the offense that resulted in VAT fines and penalties in UAE being imposed.
  3. Within 10 business days following the end of the acceptable excuse, the reduction or exemption application must be notified to the Authority using the means prescribed by the Authority.
  4. In the two years prior to the application, the person must not have been subject to any Administrative Penalties.
  5. The person must show that the violation has been addressed.

How can Elevate Accounting and Auditing help to avoid VAT fines and penalties in UAE?

Elevate Accounting and Auditing is a registered tax agency with the UAE FTA. All types of organizations can benefit from our VAT consultancy services in Dubai. Our FTA-approved tax advisors are highly qualified and knowledgeable about UAE tax laws. We recognize that every business is distinct from the next.  This means each of our services is personalized to the specific business needs of our prestigious clients. Dealing with taxes and filing tax returns is a complicated procedure, which is why businesses use tax consultants to help them with tax issues.

  • A tax consultant serves as an advisor who informs businesses on the country’s tax policies. Tax preparation, tax analysis, tax return submission, and tax payments are all included in tax advisory services in the UAE.
  • We can assist individuals and businesses in determining the taxability of transactions and ensuring that they are in compliance with UAE VAT laws and avoids any sort of VAT fines and penalties in UAE.
  • We also assist businesses in registering on time and meeting the registration requirements.
  • We, as tax agents and advisors, assist businesses in avoiding errors and claiming proper input taxes in order to maximize profits.
  • Provide accurate information on VAT administrative procedures such as VAT Reconsideration and Clarification that avoids you from paying VAT fines.
  • Elevate Accounting and Auditing may also help companies with tax audits and conducting VAT pre-tax audits.