VAT Fines and Penalties in the U.A.E

vat-fines-and-penalties-in-uae

The UAE cabinet has accepted the list of administrative penalties, which will be levied on companies for violating tax laws. Each fine or penalty would be no less than 500 AED and no more than triple the amount of tax owed on the transaction.

Let us look at these violations and the administrative sanctions that come with them in the UAE’s VAT system.

Violations and Administrative Penalties related to the Implementation of the Federal Decree-Law No. (8) of 2017 on Value Added Tax

Description of Violation  Administrative Penalty (AED)
Failure by the Taxable Person to display prices inclusive of Tax  15,000
Failure by the Taxable Person to notify the Authority of applying Tax based on the margin.  2,500
Failure to comply with conditions and procedures related to keeping the Goods in a Designated Zone or moving them to another Designated Zone.The penalty shall be the higher of AED 50,000 or (50%) of the tax, if any, chargeable in respect of the goods as the result of the violation.  
Failure by the Taxable Person to issue the Tax invoice or an alternative document when making any supply.  5,000 for each tax invoice or alternative document.
Failure by the Taxable Person to issue a Tax Credit Note or an alternative document5,000 for each tax credit note or alternative document.  
Failure by the Taxable Person to comply with the conditions and procedures regarding the issuance of electronic Tax Invoices and electronic Tax Credit Notes  5,000 for each incorrect document

Violations and Administrative Penalties related to the Implementation of the Federal Law No. (7) of 2017 on Tax Procedures

Description of Violation  Administrative Penalty (AED)
Failure of an individual conducting business to maintain the records and other information required by the Tax Procedures Law and the Tax Law(10,000) for the first time.
(50,000) in case of repetition.  
Failure of the person conducting business to submit the data, records and documents related to Tax in Arabic to the Authority when requested.  20,000
The failure of the Taxable Person to submit a registration application within the timeframe specified in the Tax Law.  20,000
The failure of the Registrant to submit a deregistration application within the timeframe specified in the Tax Law  10,000
The failure of the Registrant to inform the Authority of any circumstance that requires the amendment of the information pertaining to his tax record kept by Authority.  (5,000) for the first time.
(15,000) in case of repetition
The failure of the person appointed as a Legal Representative for the Taxable Person to inform the Authority of his appointment within the specified timeframe. The penalties will be due from the Legal Representative’s own funds.20,000
The failure of the person appointed as a Legal Representative for the Taxable Person to file a Tax Return within the specified timeframe. The penalties will be due from the Legal Representative’s own funds.  (1,000) for the first time.
(2,000) in case of repetition within (24) months.
The failure of the Registrant to submit the Tax Return within the timeframe specified in the Tax Law.  (1,000) for the first time. (2,000) in case of repetition within (24) months.  
The failure of the Taxable Person to settle the Payable Tax stated in the submitted Tax Return or Tax Assessment he was notified of, within the timeframe specified in the Tax LawThe Taxable Person shall be obligated to pay a late payment penalty consisting of:
– (2%) of the unpaid tax is due immediately once the payment of Payable Tax is late.
– (4%) is due on the seventh day following the deadline for payment, on the amount of tax, which is still unpaid.
– (1%) daily penalty charged on any amount that is still unpaid one calendar month following the deadline for payment with an upper ceiling of (300%).  
The submittal of an incorrect Tax Return by the Registrant.Two penalties are applied:
1. Fixed penalty of:
a) (3,000) for the first time.
b)(5,000) in case of repetition  
2. Percentage-based penalty shall be applied on the amount unpaid to the Authority. This is due to the error and will result in a tax benefit as follows:
– (50%) if the Registrant does not make a voluntary disclosure or he made the voluntary disclosure after being notified of the tax audit and the Authority has started the tax audit process, or after being asked for information relating to the tax audit, whichever takes place first.
– (30%) if the Registrant makes the voluntary disclosure after being notified of the tax audit and before the Authority starts the tax audit.
-(5%) if the Registrant makes a voluntary disclosure before being notified of the tax audit by the Authority.  
The Voluntary Disclosure by the Person/Taxpayer of errors in the Tax Return, Tax Assessment or Refund Application pursuant to Article 10 (1) and (2) of the Tax Procedures Law.  Same as above
The failure of the Taxable Person to voluntarily disclose errors in the Tax Return, Tax Assessment or Refund Application pursuant to Article 10 (1) and (2) of this the Tax Procedures Law before being notified that he would be subject to a Tax Audit.Two penalties are applied: Fixed penalty of: (3,000) for the first time. (5,000) in case of repetition    (50%) of the amount unpaid to the Authority due to the error resulting in a tax benefit for the Person/Taxpayer.  
The failure of the Person conducting Business to facilitate the work of the Tax Auditor in violation of the provisions of Article (21) of the Tax Procedures Law.  20,000
The failure of the Registrant to calculate Tax on behalf of another Person when the registered Taxable Person is obligated to do so under the Tax Law.The Registrant shall be obligated to pay a late payment penalty consisting of:
– (2%) of the unpaid tax is due immediately once the payment of Payable Tax is late.
– (4%) is due on the seventh day following the deadline for payment, on the amount of tax, which is still unpaid. 
– (1%) daily penalty charged on any amount that is still unpaid one calendar month following the deadline for payment with an upper ceiling of (300%).  
A Person not accounting for any tax that may be due on import of goods as required under the Tax Law.  (50%) of unpaid or undeclared tax

Violations and non-compliance with VAT would undoubtedly result in harsh penalties in the UAE. Taxpayers should avoid the above-mentioned breaches of the law to avoid the hefty fines.

How ZBS can help!

ZBS accounting and booking can help ease the process of registration for VAT and assist you to handle all VAT related concerns to avoid any penalties that are unnecessary for your business so you can focus on what matters more! Your Business!

Feel free to contact us for any support regarding VAT and sit back while our top auditors and accountant deal with your external worries.

Information and images used in this blog post were acquired from the official websites of The Federal Tax Authority, The Ministry of Economy, The Ministry of Finance, The United Arab Emirates Government portal.

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