Value Added Tax (VAT) is vital for the UAE economy as it diversifies revenue sources. Compliance with VAT Filing is critical, as non-compliance leads to hefty fines from the Federal Tax Authority. Businesses must fulfill their VAT filing obligations to avoid significant fines and penalties from the Federal Tax Authority.
Cabinet Decision No. 49 of 2021 allows for a reassessment of penalties and offers a reduction in unpaid penalties by 70% under specific conditions. Businesses in the UAE must adhere to VAT rules and regulations set by the FTA, and non-compliance can result in fines and penalties.
By revising and reducing specific penalties, the FTA allows businesses to rectify errors and comply with VAT regulations. To ensure smooth and compliant VAT operations, businesses must stay updated with the services provided by NOW Consultant.
FTA VAT Fines and Penalties on Different Violations:
The Federal Tax Authority (FTA) in the United Arab Emirates (UAE) has recently introduced changes to the fines and penalties associated with Value Added Tax (VAT). These changes have been implemented to provide relief and support to businesses adversely affected by the COVID-19 pandemic. The VAT fines and penalties amendments allow businesses to rectify any VAT-related errors and avoid penalties.
1. Late VAT Registration Penalty
The FTA has reduced the penalty for late VAT registration.
Old Fine:
Previously, businesses were penalized AED 20,000 for failing to register for VAT within the specified time frame.
New Fine:
However, with the recent amendment, the new penalty for late VAT registration is AED 10,000, providing businesses with some relief regarding financial obligations.
2. Late VAT De-registration Penalty
In the case of late VAT de-registration, the FTA has made significant changes to the penalty structure.
Old Fine:
Previously, businesses were liable to pay a penalty of AED 10,000 for delayed de-registration.
New Fine:
However, with the new amendment, businesses will be required to pay a penalty of AED 1,000 for delayed de-registration and an additional monthly penalty of AED 1,000. The monthly penalty will be applicable up to a maximum of AED 10,000.
3. Late VAT Return Filing Penalty
The penalty for late VAT return filing remains unchanged. Businesses that fail to file their VAT returns on time are subject to a penalty of AED 1,000 for the first offense and AED 2,000 for repetition within 24 months.
4. FTA Late VAT Payment Penalty
The FTA has revised the penalty structure for late VAT payments.
Old Fine:
Previously, businesses were required to pay 2% of the unpaid tax immediately. Additionally, a 4% penalty was charged on the seventh day following the payment deadline, and a 1% daily penalty was applied after one calendar month, up to a maximum of 300%.
New Fine:
Under the new amendment, businesses are required to pay 2% of the unpaid tax immediately in the event of late VAT payment. However, a 4% monthly penalty will be applied instead of the daily penalty starting one month after the payment due date. Subsequent monthly penalties will be imposed on the unsettled tax amount.
5. Incorrect Tax Return Submission by the Registrant
The FTA has also changed the penalties associated with incorrect tax return submissions by registrants.
Old Fine:
Previously, the penalty for the first offense was AED 3,000, with an increased penalty of AED 5,000 for repetition.
New Fine:
The new amendment reduces the penalty for the first offense to AED 1,000 and AED 2,000 for repetition.
6. Failure to Maintain Proper Books of Accounts:
The penalty for failure to maintain proper books of accounts remains unchanged. Businesses that fail to comply with the accounting and bookkeeping requirements for the first offense are subject to a penalty of AED 10,000 and AED 20,000 for repetition.
7. Failure to Submit Data, Records, and Documents in Arabic to the Authority:
The penalty for failure to submit data, records, and documents in Arabic to the authority remains unchanged. Businesses that do not comply with this requirement are liable to pay a penalty of AED 20,000.
8. Failure to Inform the Authority of Amendments to Tax Records:
The penalty for failure to inform the authority of amendments to tax records has been revised.
Old Fine:
Previously, businesses were penalized AED 5,000 for the first offense and AED 15,000 for repetition.
New Fine:
The new amendment reduces the penalty to AED 5,000 for the first offense and AED 10,000 for repetition.
9. Failure of Legal Representative to Inform the Authority of Appointment:
The FTA has introduced a change to the penalty associated with the failure of a legal representative to inform the authority of their appointment.
Old Fine:
Previously, the penalty for this offense was AED 20,000.
New Fine:
However, with the recent amendment, the new penalty is AED 10,000.
10. VAT Voluntary Disclosure by Taxpayer on Mistakes in Tax Return or Refund Application:
The penalty for VAT voluntary disclosure on mistakes in tax returns or refund applications has also been revised.
Old Fine:
Previously, businesses were required to pay a penalty of AED 3,000 for the first offense and AED 5,000 for repetition.
New Fine:
The new amendment reduces the penalty to AED 1,000 for the first offense and AED 2,000 for repetition.
Failure to Facilitate the Work of the Tax Auditor:
The penalty for failure to facilitate the work of the tax auditor remains unchanged. Businesses that hinder or fail to cooperate with tax auditors are subject to a penalty of AED 20,000.
Failure to Account for Tax on the Import of Goods:
The penalty for failure to account for tax on the import of goods remains unchanged. Businesses that fail to comply with this requirement are liable to pay a penalty equivalent to 50% of the unpaid or undeclared tax.
Failure to Show Prices on Tax Invoice Inclusive of Tax:
The penalty for failure to show prices on tax invoices inclusive of tax remains unchanged. Businesses that do not include tax-inclusive prices on their invoices are subject to a penalty of AED 15,000.
Failure to Inform FTA of Applying Tax Based on the Margin:
The penalty for failure to inform the FTA of applying tax based on the margin remains unchanged. Businesses that fail to comply with this requirement are liable to pay a penalty of AED 2,500.
Failure to Comply with Conditions and Procedures for Transfer of Goods in Designated Zones:
The penalty for failure to comply with conditions and procedures for transferring goods in designated zones remains unchanged. The penalty will be higher of AED 50,000 or 50% of the unpaid tax resulting from the violation.
Non-issuance of Tax Invoice or Alternative Document for Supply:
The penalty for failure to issue a tax invoice or alternative document for supply remains unchanged. Businesses that fail to provide a tax invoice or alternative document for supply are subject to a penalty of AED 5,000 for each missing document.
Non-Compliance with Issuing a Tax Credit Note or Alternative Document:
The penalty for failure to issue a tax credit note or alternative document remains unchanged. Businesses that do not issue a tax credit note or alternative document are liable to pay a penalty of AED 5,000 for each missing document.
Failure to Follow Conditions for Issuance of Electronic Tax Invoices and Tax Credit Notes:
The penalty for failure to follow conditions for issuing electronic tax invoices and tax credit notes remains unchanged. Businesses that do not comply with the requirements for electronic tax invoices and tax credit notes are subject to a penalty of AED 5,000 for each incorrect document.
The amendments introduced by the UAE’s Federal Tax Authority (FTA) have provided businesses with revised fines and penalties for Value Added Tax (VAT) non-compliance.
How to Avoid Penalties In UAE VAT:
Compliance with Value Added Tax (VAT) regulations is crucial for businesses in the UAE to avoid hefty fines imposed by the Federal Tax Authority (FTA). Businesses can follow these guidelines to prevent violations and ensure compliance with VAT laws.
1. Fulfill VAT Filing Obligations:
Businesses must meet their VAT filing obligations promptly. Timely registration, submission of VAT returns, and payment of taxes are essential to avoid penalties.
2. Engage Experienced VAT Consultants:
Seeking assistance from experienced VAT consultants in the UAE is crucial. These professionals can navigate complex tax filing procedures, provide expert guidance, and ensure compliance with VAT regulations.
3. Stay Updated with FTA Regulations:
Businesses should regularly monitor updates and changes in VAT regulations issued by the FTA. Staying informed about the latest requirements and guidelines helps prevent inadvertent violations.
4. Maintain Proper Books of Accounts:
Compliance with accounting and bookkeeping requirements is vital. Accurate and up-to-date financial records enable businesses to fulfill their VAT obligations and avoid penalties.
5. Ensure Correct Tax Return Submission:
Carefully review tax returns before submission to prevent errors. Businesses should double-check the accuracy of all financial information to avoid penalties associated with incorrect tax return submissions.
6. Promptly Inform FTA of Amendments:
Notify the FTA promptly about any amendments or changes to tax records. Failure to inform the authority can result in penalties, so businesses must proactively communicate any updates.
7. Facilitate Tax Auditors’ Work:
Cooperate fully with tax auditors during inspections and provide all necessary information. Facilitating their work demonstrates compliance and helps avoid penalties.
8. Comply with Pricing Requirements:
Include tax-inclusive prices on invoices to comply with VAT regulations. Failing to show prices inclusive of tax may lead to penalties, so businesses should ensure proper invoicing practices.
How Can Now Consultant Help Businesses in UAE with VAT?
Now Consultant offers expert VAT guidance, aiding businesses to comply with complex regulations and stay updated on FTA amendments. They provide comprehensive support, including bookkeeping, review, and submission assistance, while proactively notifying about amendments to prevent penalties.
With pricing compliance and auditing assistance, Now Consultant ensures smooth tax processes, reducing risks for businesses.
Conclusion:
In conclusion, implementing Value Added Tax (VAT) in the United Arab Emirates (UAE) has brought about a new regulatory framework with fines and penalties for non-compliance. This article has explored the various aspects of VAT fines and penalties in the UAE including FTA VAT late payment penalty, the article highlights the importance of understanding and adhering to the tax regulations to avoid legal consequences for the FTA
