Just like every other tax system around the world, VAT in UAE will follow certain penalty rules to ensure proper tax compliance. The Federal Tax Authority (FTA) has finalized tax penalty laws that are liable on various conditions.
Prior to the launch of VAT system in the country, the UAE Council of Ministers had released some VAT Penalty Laws to deal with the cases of tax violations. The decision was made by the cabinet according to which a minimum penalty of Dh500, but not more than triple of the tax value in question, will be levied on any kind of tax violation.
VAT Fines in UAE For Non-Registration
If a VAT eligible business in the UAE fails to register on the FTA portal within the specified timeline, they will have to pay a penalty of Dh20,000.
A penalty of Dh10,000 shall be applicable to those registrants who fail to submit deregistration applications within the specified timeframe.
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Penalty on Late Filing of Return/Tax
As per the UAE tax laws, businesses with annual turnover of more than Dh150 million are required to file monthly returns, while those with turnover less than Dh150 million will only have to file returns and pay taxes on a quarterly basis.
The VAT return filing and tax payment deadline for January 2018 is February 28. It means, businesses will have to file their returns and pay taxes on or before this date, otherwise, a penalty will be charged according to the rules mentioned below.
If a VAT registrant fails to file a tax return within the specified timeline, he will pay Dh1,000 in fine for the first offense and Dh2,000 for repetition within 24 months.
If a taxable person fails to pay taxes within the timeframe, he shall pay a penalty of:
- (2%) of the unpaid tax if the payment of Payable Tax is made within seven days after the deadline;
- (4%) of the unpaid tax on the seventh day or beyond following the deadline for payment;
- (1%) daily penalty (not more than 300%) on due tax amount if the tax is still unpaid one month following the payment deadline.
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Penalty on Non-disclosure of Tax Due on Imports
If a taxpayer fails to account for any due tax on import of goods as per the law, he will have to pay a penalty of 50% of the unpaid tax.
Penalty on Submission of Incorrect Tax Return or Non-disclosure of Errors in tax returns
If a taxpayer fails to voluntary disclose errors in the returns filed by him, he will incur a fine of Dh3,000 the first time and Dh5,000 for repeated offence. If a taxpayer voluntary discloses errors but provides incorrect information, they will be liable to pay a penalty of Dh3,000 the first time and Dh5,000 on repetition.
Penalty On Non-Disclosure Of Errors In Tax Records
Dh5,000 for the first time and Dh15,000 on repetition will be levied from those registrants who fail to inform the FTA of any amendments required in the tax record information provided to the authority.
Penalty on Non-maintenance of Accounting Records
Many rules were made and penalties were decided on non-compliance with tax rules across the country. After the launch of excise tax in UAE, it has been made mandatory for businesses to keep the full accounting of their business stock and maintain other records properly.
If a business fails to keep and maintain proper tax records and related information as described in the laws, it will have to pay a fine of Dh10,000 for the first offence and Dh50,000 on repetition.
If a taxpayer fails to produce proper tax data, records and documents in Arabic when asked by the authority, he will have to pay Dh20,000 in the penalty.
Penalty on Wrong Pricing of Items
In case if a business doesn’t display the right prices of items inclusive of the excise tax, they may have to pay a fine of Dh15,000 to the authorities.
The rules also state that the taxable goods must be kept in a designated zone as per the conditions and procedures specified for it, otherwise there will be a penalty of Dh50,000 on non-compliance of any of the rules.
Other VAT UAE Penalty Laws
If a legal representative of a taxable person does not inform the FTA of his appointment within the specified timeframe, he shall pay a fine of Dh20,000.
If a legal representative fails to file a tax return on behalf of his taxable employer within the specified timeframe, he will be charged Dh1,000 for the first time and Dh2,000 for repetition within 24 months.
Fees for Registration And Other FTA Services
Accounting software provider firms will have to pay Dh10,000 as software registration/renewal fee for one year, and the registration of a designated zone for a year will cost Dh2,000.
Tax agents will be able to get services like new registrations and renewals by paying a fee of Dh3,000 for three years. The registration of a warehouse keeper or issuance of an e-warehouse keeper registration certification are free of charge, but the customer will have to pay Dh500 on request for an official printed certificate.
The decision was also made regarding the fees to be collected by the Federal Tax Authority (FTA) on the services provided to its clients. Some of the services like registration under tax and the issuance of an e-tax certificate will not occur any charge. However, the customers will have to pay a Dh500 fee for the application for an attested paper registration certificate.