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UAE VAT Return Filing
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VAT Penalties and Fines in UAE
The implementation of Value Added Tax (VAT) in the United Arab Emirates (UAE) on January 1st, 2018, introduced a new set of regulations for businesses operating in the country. Complying with these VAT mandates, which cover registration, filing returns, and other procedures, is crucial to avoid VAT penalties and fines imposed by the Federal Tax Authority (FTA). The UAE Cabinet decision No. (75) of 2023 listed the administrative penalties related to taxation violations of corporations and businesses. In this article, you can learn about the violation and its equivalent administrative VAT penalties and fines in UAE.
Avoid the penalties and fines with timely VAT compliance!!
VAT Violation in UAE: Penalties and Fines
The following table contains the violations and related administrative penalties based on the UAE Cabinet decision No. (49) of 2021,
No. | Violation Description | Penalty (in AED) |
1 | Failure to keep required records and information as per Tax Procedures Law | 10,000 (first time), 20,000 (for repetition) |
2 | Failure to submit records, data, or documents in Arabic when requested by the Authority | 20,000 |
3 | Failure to submit tax registration application within the specified timeframe | 10,000 |
4 | Late submission of deregistration application | 1,000 per month (up to 10,000) |
5 | Failure to notify the Authority of changes in tax record information | 5,000 (first time), 10,000 (for repetition) |
6 | Legal Representative's failure to inform Authority of appointment within specified timeframe | 10,000 |
7 | Failure by Legal Representative to file a Tax Return within the timeframe | 1,000 (first time), 2,000 (if repeated within 24 months) |
8 | Late submission of Tax Return | 1,000 (first time), 2,000 (if repeated within 24 months) |
9 | Late settlement of Payable Tax | 2% daily for the first day, 4% monthly thereafter (up to 300%) |
10 | Submission of an incorrect Tax Return | 1,000 (first time), 2,000 (for repetition) |
11 | Submission of Voluntary Disclosure for errors in Tax Return/Assessment | 5% to 40% of tax difference based on delay duration |
12 | Failure to disclose tax errors before Authority notification for audit | 50% on error, plus 4% monthly |
13 | Failure to facilitate Tax Auditor's work as required | 20,000 |
14 | Failure to account for Tax on behalf of another person | 2% daily for the first day, 4% monthly thereafter (up to 300%) |
15 | Failure to account for Tax on imported goods | 50% of unpaid or undeclared Tax |
16 | Failure to display prices inclusive of VAT | 5,000 |
17 | Failure to notify the Authority of Tax applied based on Margin | 2,500 |
18 | Non-compliance with conditions for keeping or moving goods in a Designated Zone | Higher of 50,000 or 50% of the applicable Tax on goods |
19 | Failure to issue a Tax Invoice or alternative document for any supply | 2,500 per instance |
20 | Failure to issue a Tax Credit Note or alternative document | 2,500 per instance |
21 | Non-compliance with procedures for issuing electronic Tax Invoices and Credit Notes | 2,500 per instance |
Also read: VAT Return Preparation Checklist in UAE
How to avoid VAT penalties and fines in UAE?
UAE Businesses can avoid financial penalties due to violations of tax regulations by using the following tips.
- Register for VAT: All businesses in UAE with an annual revenue exceeding AED 375,000 must register for VAT. Voluntary registration is available for businesses with revenue exceeding AED 187,500.
- Maintain Accurate Records: Keep meticulous records of all business income, costs, and VAT charges. Ensure financial records can demonstrate your annual turnover for registration purposes.
- Issue Tax Invoices: For every taxable supply, issue a proper tax invoice within 14 days. The invoice must include the supplier's name, address, and Tax Registration Number (TRN).
- Collect VAT: Remember, you act as a tax agent, collecting VAT from your customers on behalf of the UAE government for taxable goods and services.
- File VAT Returns: The frequency of filing VAT returns depends on your company's annual turnover. Businesses exceeding AED 150 million in revenue file monthly, while those below file quarterly.
- Understand Exemptions: The Federal Tax Authority (FTA) exempts certain businesses and supplies from VAT. Familiarise yourself with zero-rated supplies (taxable but at 0%) and exempt suppliers.
- Reverse Charges: For imports from outside the Gulf Cooperation Council (GCC), you might be responsible for "reverse charges," essentially the VAT you would have paid if the goods or services were purchased within the UAE.
- Timely Payments: Pay your VAT on time to avoid late payment penalties. The FTA website provides information on payment methods.
Also read: How to Audit VAT returns in UAE?
Conclusion
Businesses in the UAE must comply with VAT regulations to avoid penalties and fines set by the Federal Tax Authority (FTA). These penalties range from failing to register for VAT on time to not cooperating with a tax audit. By following best practices like maintaining proper records, issuing tax invoices, and filing returns on time, UAE businesses can minimize the risk of incurring VAT-related financial fines.
Let the Filings.ae tax experts handle the VAT compliance & avoid the hefty penalties!!
