DIFFERENT TYPES OF VAT FINES AND PENALTIES IN UAE

Like any other world’s tax system, to avoid heavy VAT fines and penalties, VAT in UAE must obey all rules and regulations of the Federal Tax Authority (FTA). Fines & penalties will be imposed by FTA on businesses for violating the VAT laws. So each taxpayer needs to understand; what are the various circumstances that led to the heavy fines and penalties imposed by FTA. There are different types of VAT Fines and Penalties in the UAE. Some are charged for non-compliance of the administrative procedure that a taxable person needs to follow as per the requirement of the UAE VAT Law. Let’s have a look at the different types of VAT fines & penalties.

1. VAT Fines & Penalties in the UAE Associated with VAT Registration & Deregistration

  • A penalty of AED 20,000/- shall be applicable to a business in UAE who fails to submit the registration application on the FTA portal within the specified time frame.
  • A penalty of AED 10,000/- shall be applicable to those registrants who fail to deregister within the specified timeline.

2.  Fine on Non-maintenance of Accounting Records

If a business fails to keep the essential financial records and related information as described in the laws, it will have to pay a fine of AED 10,000 for the first offence & AED 50,000 for each repetitive violation.

3. Fine on Failure to submit the records in Arabic

If a taxpayer fails to submit the records, tax information & documents in Arabic when requested by the FTA authority, then he has to pay AED 20,000 in the penalty.

4. Penalties will be charged to the legal representative

If a legal representative of a taxable person does not inform the FTA of his appointment within the specified time frame, he shall pay a fine of AED 20,000.

  • If a legal representative be unsuccessful to file a tax return on behalf of his taxable company in the specific timeframe, he will be charged AED 1,000 for the first time and AED 2,000 for repetition within 24 months.

5. Penalties on failed to inform any changes in tax record

Failure to update the FTA Authority of any changes in tax records, penalties will be charged as AED 5,000 for the first time &AED 15,000 in case of repetition.

6. Penalty on Late Filing of Return/Tax:

If a VAT registrant fails to pay the tax mentioned in the tax return form within the specified period, he has to pay AED 1,000 in fine for the first offense and AED 2,000 in case of repletion within 24 months. Late filing VAT payment penalty can be charged as below:

  • 2% of the unpaid tax is due instantly.
  • 4% is due to the 7th day next to the deadline for payment.
  • 1% on a daily basis fine will be charged on any sum which is due one month after the time limit for a fee, up to the highest of 300%.

7. Filing of incorrect tax return fine

Two penalties are applied:

  • Fixed penalty:

o   AED 3,000, for the first time

o   AED 5,000, in case of repetition

  •  Percentage-based penalty:

o    50%- if the registrant made the voluntary disclosure after being notified of the tax audit and the FTA Authority has commenced the tax audit procedure, or  after being inquired for information concerning the tax audit or he does not generate a voluntary disclosure.

o    30%- if he generates a voluntary disclosure after being notified of the tax audit and prior to the FTA Authority begins the tax audit.

o    5%- if he generates a voluntary disclosure prior to being informed of the tax audit by the FTA Authority.

8. VAT Fines and Penalties Related to Voluntary Disclosure Form (VDF) 211

A VAT-registered individual may submit a Voluntary Disclosure Form (VDF) 211 in case of any lapse or any error in the VAT returns. There are two penalties are applied:

  • Fixed penalty:

o   AED 3,000 for using VAT Disclosure Form for the first time.

o   AED 5,000 in case of repetition.

  • Percentage based penalty:

o   50% on the amount not paid due to the error once the authority stated tax audit or being asked of certain information about the tax audit whichever happens first.

o   30% if the individual makes the Voluntary Disclosure after receiving the warning for a tax audit but before the start of the audit.

o   5% if the voluntary disclosure us used being the FTA authority information for the tax audit.

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

Two penalties are applied:

  • Fixed penalty:
    • AED 3,000 for the first time
    • AED 5,000 in case of repetition
  • 50% of the amount unpaid to the FTA authority due to the error.

10. Fines on following incorrect Tax invoice format.

  • AED 5,000 -Raising the incorrect simplified tax invoice.
  • AED 10,000 - Raising incorrect full tax invoice.

Above mentioned are some of the important penalties and fines of VAT in UAE charged by FTA for different categories in the violations of tax laws. However, if your business has been charged with any of the VAT fines and penalties, being the top vat consultants in UAE, ARC Associates tax experts will help you for smoothly dealing with these circumstances. We will take care of all your concerns regarding VAT & update with you the latest changes in VAT rules & regulation. Our experts are highly skilled and experienced with the Tax Law in UAE along with the practical VAT implementation in UAE. So if you are looking for any VAT services in UAE- Dubai, we are happy to assist you and will help your business to grow by avoiding any VAT fines and penalties.

Location: United Arab Emirates

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