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Revised VAT Fines and Penalties in UAE

In the United Arab Emirates (UAE), Cabinet Decision No. (41) of 2017 amends with Cabinet Decision No. (49) of 2021 concerning Administrative Penalties for Violations of UAE Tax Law. Amendments will take effect from 28 June 2021. The tax registrants take benefit of these provisions as it provides more relief for business sectors so that they can make an even greater contribution to boosting the national economy’s growth. 

Why FTA Amended Tax Penalties in the United Arab Emirates?

The amendments generally reduce the VAT fines and penalties for non-compliance. Taxpayers will now have time to settle underpaid taxes before they are penalized for late payment. In this way, it enhances the competitiveness of the state in the business sector by supporting tax registrants and assisting them to fulfill their tax obligations.   

Major Amendments to the VAT Penalties:

FTA stated the new ways of calculating the penalties without changing its conditions, while some other penalties have been reduced. It’s significant to be aware of these provisions to make the best decision for your company. We will discuss here the updates that brought a major change for taxpayers: 

Update Penalty for Late Registration

The failure of a Taxable Person to register within the deadline specified in the Tax Law.

  • Previous Penalty- AED 20,000
  • Amended Penalty- AED 10,000

Late VAT De-registration Penalty

The Registrant fails to submit a deregistration application within the timeframes specified in the Tax Law.

  • Previous penalty – AED 10,000
  • Amended penalty – AED 1,000 thereafter on the same date, up to a maximum of 10,000 AED.

Submitting Voluntary Disclosure

The failure of the taxable person to voluntarily disclose errors in the tax return, tax assessment or refund application before being notified that he will be subject to a tax audit. In addition, in the case of non-filing of voluntary disclosures before audit, notification will be increases. 

  • Previous penalty – AED  3,000 at earliest and AED 5,000 in case of repetition.
  • Amended penalty – AED  1,000 at earliest and AED 2,000 in case of repetitive violence.

Late Payment of VAT

The Cabinet Decision imposes a penalty on the responsible registrant. In case of fails to pay a penalty applicable to the late payment of payable tax as follows: 

Previous penalty 

  • A 2% of the unpaid tax is due immediately.
  • The 4% is due seven days after the payment deadline.
  • A 1% daily penalty will be applied to any amount that remains unpaid after one calendar month

Amended penalty 

  • A 2% penalty is due immediately for any unpaid tax.
  • A 4% monthly penalty is due upon unpaid tax after a month from the due date, and on the same date every month thereafter.

Registrant submits an incorrect tax return.

Incorrect submission of a tax return by the registrant.

  • Previous penalty – AED  3,000 for the first offence and AED 5,000 in case of repetition.
  • New penalty – AED  1,000 for the first offence and AED 2,000 in case of repetition.

Failure to maintain proper Bookkeeping Records

The failure of a person conducting business to maintain the mandatory records and other information specified by this Law and the Tax Law. 

  • Previous penalty – AED 10,000 for the first violation and AED 50,000 for each repeated violation.
  • New penalty – AED 10,000 for the first violation, AED 20,000 for all subsequent violations.

Failure to leakthe Authority of any circumstance that requires the amendment of the information pertaining to its tax record kept by Authority.

  • Previous penalty – AED 5,000 for the first instance and AED 15,000 in case of repetition.
  • New penalty – AED 5,000 for the first instance and AED 10,000 in case of repetition.

Failure of the Legal Representative of the Taxable Person to inform the Authority of its appointment as Legal Representative within the specified timeframe, in which case the penalties will be due from the Legal Representative’s own funds

  • Previous penalty – AED 20,000
  • Amended penalty – AED 10,000

How to Get Rid of VAT Fines and Penalties? 

As FTA reduces fines and penalties for tax payers in the case of VAT non-compliance. It’s a golden chance for businesses to avoid potential errors and minimize the risk of sanctions in the UAE. Each taxable firm needs to update their records and document submission by fulfilling amended requirements of relevant authorities. 

VAT penalties can be waived off with the help and guidance of tax consultants in the United Arab Emirates. Bestax Chartered Accountants, give you access to one of the top tax experts who will handle all your VAT concerns and advise you on the latest updates from the Federal Tax Authority. You can take advantage of these amended VAT penalties with our assistance and prevent heavy fines from hitting your assets.

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