VAT Fines and Penalties in UAE

VAT fines and penalties in UAE will be imposed by Federal Tax Authority (FTA). Businesses in UAE must abide by all the rules and regulations of FTA in order to avoid heavy VAT fines and penalties. FTA has officially confirmed the complete list of all the administrative VAT Fines and Penalties in UAE that will be imposed on businesses for violating the VAT laws.

 Read More: NEW VAT fines and penalties

VAT Penalties UAE

Companies will face consequences in the form of heavy FTA VAT fines if they breach VAT laws in UAE. In order to stay away from the VAT fines and penalties, businesses must ensure VAT compliance as per FTA. They must consult with a tax expert before implementing VAT in the organization.

FTA amends New VAT penalties and fines in UAE to help businesses to recover from the impact of COVID-19. FTA has reduced the penalties on VAT to motivate the businesses to avoid fines by ensuring VAT compliance. The amendments will be effective from 28 June 2021.

New VAT fines and penalties in UAE – Click Now! 

Xact Auditing is one of the approved tax experts in UAE. Our tax specialists will assist you in implementing VAT and assure VAT compliance by avoiding VAT fines. If your company, unfortunately, received a fine from FTA, Xact will help you waive off FTA VAT fines.

1. Failure to keep the required financial records such as tax invoices and books of accounts specified in the tax law.

AED 10,000 for the first time.

AED 50,000 for each repeat violation.

2. Failure to submit the documents in Arabic when requested by the FTA.

AED 20,000

3. Late VAT registration fine.

AED 20,000

4. Late VAT De-registration fine.

AED 10,000

5. Failure to inform FTA of any changes in tax records that need to be submitted.

AED 5,000 for the first time.

AED 15,000 in case of repetition.

6. Late filing of tax return fine / Late VAT return fine. (Failure to file VAT return within a specified time).

AED 1,000 for the first time.

AED 2,000 in case of repetition within 24 months.

7. Late VAT payment penalty; Failure to pay the tax stated in the tax return form within the time-frame specified by the tax law. Late VAT payment penalty will be as follows:

• 2% of the unpaid tax is due immediately.
• 4% is due on the seventh day following the deadline for payment.
• 1% daily penalty will be charged on any amount that is still unpaid one calendar month after the deadline for payment, up to a maximum of 300%.

8. Filing of incorrect VAT return penalty

Two penalties are applied:

• A fixed penalty of:
  a. (AED 3,000) for the first time
  b. (AED 5,000) in case of repetition

• The percentage-based penalty shall be applied on the amount unpaid to the Authority due to the error as follows:
  a. (50%) if the Registrant does not make a voluntary disclosure or he made the voluntary 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. b. (30%) if the Registrant makes a voluntary disclosure after being notified of the tax audit and before the Authority starts the tax audit.

  c. (5%) if the Registrant makes a voluntary disclosure before being notified of the tax audit by the Authority.

9. Submission of VAT Voluntary disclosure by a business in case of errors in a tax return or tax refund.

Two penalties are applied:

• A fixed penalty of:
  a. (AED 3,000) for the first time.
  b. (AED 5,000) in case of repetition
• Percentage-based penalty shall be applied on the amount unpaid to the Authority due to the error as follows:
  
  a. (50%) if the Person/Taxpayer makes the disclosure after either of the following conditions applies: (1) they have been notified of the tax audit and the Authority has started the audit process, or (2) they have been asked for information relating to the tax audit.b. (30%) if the Person/Taxpayer makes a voluntary disclosure after being notified of the tax audit but before the start of the tax audit.

  c. (5%) if the Person/Taxpayer makes a voluntary disclosure before being notified of the tax audit by the authority.

10. Failure to voluntarily disclose errors in a tax return or tax refund application before a tax audit.

Two penalties are applied:

• Fixed penalty of (AED 3,000) for the first time
  b. (AED 5,000) in case of repetition

• 50% of the amount unpaid to the authority due to the error.

11. Failure to facilitate the work of FTA tax auditor.

AED 20,000

12. Following incorrect Tax invoice format.

• AED 5,000 for raising incorrect simplified tax invoice.
   
• AED 10,000 for raising incorrect full tax invoice. 

13. Failure to account for tax due on import of goods as required under the tax law.

50% of unpaid or undeclared tax.

14. Failure to display prices on tax invoice inclusive of tax.

AED 15,000

15. Failure to notify the FTA of applying tax based on the margin.

AED 2,500

16. Failure to comply with conditions & procedures related to the transfer of goods in designated zones.

The penalty will be the higher of AED 50,000 or 50% of the tax, if any, unpaid on the goods as the result of the violation.

17. Failure to issue a tax invoice or alternative document when making any supply.

AED 5,000 for each missing tax invoice or alternative document.

18. Failure to issue a tax credit note or alternative document.

AED 5,000 for each missing tax credit note or alternative document.

19. Failure to comply with the conditions & procedures regarding the issuance of electronic tax invoices and electronic tax credit notes.

AED 5,000 for each incorrect document.

VAT Fines Discount in UAE

FTA urges tax registrants to take advantage of VAT fines discount in UAE. There are some conditions to get VAT penalty waiver UAE by FTA. Many businesses in UAE have pending tax fines and penalties from Federal Tax Authority (FTA) related to excise tax and VAT. This is good news for them as FTA has introduced discounts on tax fines and penalties.

If  you pay the 30% of the tax outstanding liability before December 31, 2021 – FTA will waive off the remaining 70% of fines and penalties.

VAT fine and penalty waiver

If your company has been charged with any of the VAT fines, Xact Auditing tax experts will assist you in reducing of completely waive off those fines and penalties.

We will help you in waive off VAT fines. Xact Auditing is registered tax consultants and we will take care of all the concerns related to VAT and provide you advises in light of latest changes in VAT rules and regulation. Let Xact Auditing help you while dealing with your tax matters, Contact us.

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