What are the Administrative Penalties For Non-Compliance of the UAE VAT Law?
The violation of the provisions of the UAE VAT Law can lead to certain VAT Fines And Penalties In The UAE. It is important for every taxpayer to know what are the different circumstances that lead to the imposition of these penalties by the Federal Tax Authority (FTA) for violating the UAE VAT Law.
What are the different types of VAT Fines and Penalties In the UAE?
There are VAT Fines And Penalties In The UAE 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 us discuss some of the VAT Fines And Penalties In The UAE under the UAE VAT Law which shall be applicable to a VAT registered person if there is any non-compliance of the UAE VAT Law.
VAT Fines and Penalties in the UAE Associated with VAT Registration
Any person who makes taxable supply above the mandatory VAT registration threshold in the UAE should get themselves registered under VAT in UAE and obtain a Tax Registration Number (TRN). If in case the taxable person fails to register within the specified timeline which is in 30 days from reaching the turnover limit, then such VAT eligible business will have to pay late registration fine. A penalty of AED 20,000/- shall be applicable to such a business who fails to submit the registration application within the time frame.
VAT Fines and Penalties in the UAE Associated with VAT Deregistration
If in case the taxable person fails in applying for a mandatory de-registration of VAT in UAE within the time specified by the authority, that is 20 business days from the occurrence of events causing the taxable person to deregister from VAT in UAE.
A taxable person has to apply for VAT de-registration when they stop making taxable supplies or if the taxable turnover for the past 12 months is less than the voluntary registration limit. A penalty of AED 10,000/- shall be applicable to such a business failing to deregister within the time.
VAT Fines and Penalties in the UAE if You Fail to Display Prices Inclusive of VAT
As per the provisions of the UAE VAT law, when goods are sold with a display where prices are displayed, such displayed price must be inclusive of tax. We can take the example of hypermarkets or supermarkets or any retail outlets where goods will be displayed on shelves along with their price. According to the provisions of the law, such displayed price should be shown inclusive of VAT.
So, the displayed price will be the maximum price that the customer will have to pay while receiving the tax invoice. An administrative penalty of AED 15,000/- would be levied if the taxable person fails to display prices inclusive of VAT.
VAT Fines and Penalties in the UAE if You Fail to Issue a Tax Invoice and Tax Credit Note
Value Added Tax is based on the concept of charging tax on each level of consumption and it is structured in a way that it will be the cost to the final customer. It is therefore important to provide the proper documents to the customer who pays the VAT.
In UAE VAT Law, the supplier who is tax registered has the responsibility to issue the Tax Invoice or Tax Credit note to the customers. According to VAT in UAE, If the taxable person fails to issue a tax invoice or tax credit note, then they would be penalized with AED 5000/- for each tax invoice or tax credit note.
VAT Fines and Penalties in the UAE for Delay in Filing the VAT Return
A VAT-registered person has the responsibility to submit their VAT returns within the 28th of the month following the tax period. If in case the taxable person fails to submit the VAT Returns before 28th of the month following the tax period, then AED 1,000/- will be charged as a penalty for the first time. If the delay in submitting VAT return happens subsequently or if the VAT return is not filed, then AED 2,000/- would be levied.
VAT registered person should also make the payment to FTA within the return filing due date or VAT return deadline. If the due tax is not paid within the deadline then 2% will be charged immediately on the unpaid VAT after the due date. An additional 4% will be charged if the VAT is unpaid even after 7days from the VAT return deadline. Further, if it is still not paid in a month then 1% daily until the penalty will reach 300% of the unpaid tax.
VAT Fines and Penalties in the UAE Related to Voluntary Disclosure Form (VDF) 211
A VAT-registered person may submit a Voluntary Disclosure Form (VDF) 211 in case of any omission or any error in the VAT returns. For submitting the Voluntary Disclosure Form (VDF) 211 there is a fixed penalty and a percentage based depending upon when the Voluntary Disclosure Form (VDF) 211 is submitted to rectify the error or omission in the VAT return. Penalties that may be charged while submitting the Voluntary Disclosure Form are Fixed penalty: 3000/- AED for using VAT Disclosure Form for the first time 5000/- AED for using the VAT Disclosure Form for the second time. Percentage based penalty:
- 50% on the amount unpaid due to the error after the authority stated tax audit or being asked of some information regarding the tax audit whichever happens first.
- 30% if the person makes the Voluntary Disclosure after getting the notification for a tax audit but before the start of the audit.
- 5% if the voluntary disclosure us used being the authority notifies for the tax audit.
VAT Fines and Penalties in the UAE if You Fail to Keep the Records
Every VAT registered person has the responsibility to account and maintain proper records or documents to support all the transactions. It is also their responsibility to submit the documents or information’s whenever requested by FTA or during Tax Audit. If any taxable person conducting business in the UAE fails to keep the required records or any such information will be fined for AED 10,000/- for the first time and AED 50,000/- in case of repetition.
VAT Fines and Penalties in the UAE if You Fail to Provide Records in Arabic
Records or documents can be maintained in Arabic or English. However, businesses should produce documents translated in Arabic if requested by FTA. If any taxable person fails to submit any records or data or any other supporting documents when requested by the authority in Arabic AED 20,000/- penalty will be imposed.
Can the Federal Tax Authority (FTA) in The UAE Reduce or Remove VAT Fines and Penalties?
The Federal Tax Authority may reduce or remove the penalty which is imposed for not complying with the provision of the VAT Law. If the person can produce any evidence justifying the reason for such non-compliance, then the authority may reduce or waive such administrative penalty as specified in the Executive Regulations of the law.
When and How to Apply For VAT Reconsideration in the UAE?
The VAT Reconsideration application must be submitted online to the Federal Tax Authority within 20 working days from the date of receiving such a penalty. This application must be prepared in Arabic only mentioning about the facts of the case. The authority has the timeframe of 20 business days to review the application and decide if to retain the penalty or to waive it off.
Emirates Chartered Accountants Group is a Registered Tax Agent with the Federal Tax Authority under Emirates International Chartered Accountants Group. We are happy to support and guide your company for any of the above-mentioned requirements. Our Tax Professionals are highly qualified and well versed with the UAE Tax Law with the practical implementation of VAT in UAE and Bahrain. We understand that every business is different from the other. Hence, each of our services is tailored as per your business needs.
Looking for TAX Services in the UAE? We are happy to assist.
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Feb 29,2024UAE Corporate Tax Registration
