Everything you Need to Know about VAT Penalties in UAE
Is your company prepared for the UAE VAT? As a small word tax often strikes a little bit of fear in the minds of people and creates a dilemma regarding the tax to be paid from the point of origin- point of consumption. So herewith sharing the views, concepts and ideas behind the UAE Vat penalties in light of VAT law. The United Arab Emirates introduced a new form of indirect tax called Value Added Tax (VAT) on 1st January 2018 with a rate of 5 per cent on goods & services. VAT Registration is mandatory for those businesses, whose taxable supplies and imports exceed AED 375,000 per annum. While businesses can voluntarily register for VAT if their taxable supplies and imports exceed AED 187,500 per annum. All the VAT registered organizations or the ‘taxable persons must submit a ‘VAT return’ at the end of each tax period to the Federal Tax Authority (FTA).
Also read, VAT Deregistration Penalty in UAE
VAT return filing declares how much VAT is to be paid by the taxpayer or reimbursed by the tax authorities. A VAT return recapitulates the assessment of the supplies and purchases a taxable person has made during the tax period and shows the taxable person’s VAT liability. In case of failure to file a return before the deadline VAT penalty arouses. The various circumstances of VAT penalties that a taxable person goes through are mentioned below:
1. Failure to document the financial records such as tax invoices and books of accounts specified in the tax law: AED 10,000 for the first time and 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 for any changes in tax records that need to be submitted: AED 5,000 for the first time and AED 15,000 in case of repetition.
6. Late filing of tax return fine / Late VAT return fine.: AED 1,000 for the first time and AED 2,000 in case of repetition within 24 months.
7. Filing of incorrect VAT return penalty: AED 3,000 for the first time, AED 5,000 in case of repetition
8. Submission of VAT Voluntary disclosure by a business in case of errors in a tax return or tax refund: Fixed penalty of AED 3,000 for the first time, AED 5,000 in case of repetition
9. Failure to voluntarily disclose errors consists of two penalties are applied. which includes: Fixed penalty of:
- AED 3,000 for the first time
- AED 5,000 in case of repetition
- 50% of the amount unpaid to the authority due to the error
10. Failure to provide support to FTA tax auditor: AED 20,000
11. Issuing tax invoice format not as prescribed by FTA: AED 5,000 and AED 10,000 for raising incorrect tax invoice.
12. Failure to account and keep the record of tax due: 50% of unpaid or undeclared tax.
13. Failure to display prices on tax invoice inclusive of tax: AED 15,000
14. Failure to notify the FTA of applying tax based on the margin: AED 2,500
15. Failure to comply with conditions 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
16. Failure to issue a tax invoice: AED 5,000 for each missing tax invoice or alternative document.
17. Failure to issue a tax credit note to any supply of goods; AED 5,000 for each
18. Failure to comply with the conditions mentioned in the law regarding the issuance of electronic tax invoices: AED 5,000 for each incorrect document
Why choose CDA?
As a team of highly skilled professionals, we know the importance of accurate and timely VAT Filing. We help you to avoid penalties, Reimbursement of input tax, Reimbursement of tax on import of goods through the Reverse Charge Mechanism, Reduces the risk of errors in VAT filing, Increases the credibility of the business in the market and enhances the goodwill. We also provide quality consultancy services to the business world in the field of CFO Services, Auditing Services, Accounting & Bookkeeping Services, Due Diligence Services and Accounting Software services in Dubai.
You may also read, How Does Vat Work In Uae?
If you have any doubts regarding the VAT Return Filing in Dubai or about your current business, feel good to discuss with us. CDA is there for your care! Our experts will give you one-hour Free Consultation to keep your uncertainties away!