VAT in UAE: Penalties for Non-Compliance
VAT implementation has taken shape in the UAE. The Ministry of Finance had released deadlines for VAT registration for businesses. If you are a business that falls within the Mandatory / voluntary threshold and still haven’t registered yet, the registration is open still in the FTA website. The FTA urges such businesses to register immediately and comply to their Tax obligations. A discussion on the cabinet resolution regarding VAT Compliance violations and administrative penalties.
The penalties range from AED 3000 to AED 50,000 depending on the offences committed. The regulations covers individuals, companies, tax agents and their legal representatives who come under the gambit of the new VAT regulations.
As per the regulations, if the person fails to keep required records and other information specified in the laws will be fined AED 10000 in the first instance and AED 50000 in case of repetition. The fine for not registering within the stipulated timeframe is AED 20000. In case of a failure to submit data, records and documents related to tax in Arabic to authority when requested, the fine would be AED 20000.
If the legal representative of the taxable person/business fails to inform the authorities about his appointment, the penalty will be AED 20,000, a penalty of AED 1000 in case of failure of filing tax returns by the legal representative within the time frame – all payable from the legal representatives’ own funds. In case of submitting incorrect tax returns, the fine would be AED 3000 for the first time and AED 5000 in case of repetition.
If the taxpayer voluntarily discloses any errors in tax returns, a fixed penalty of AED 3000 (for the first time) / AED 5000 (in case of repetition) plus a percentage based penalty has to be paid. The percentage penalty could be 50%, 30% or 5% of the amount unpaid to the tax authority due to error based on whether the disclosure was made after the start of tax audit, after the notification on tax audit but before the start of it or before the notification on tax audit respectively – translates to ‘the earlier the voluntary disclosure on errors in vat return is made, lesser will be the penalty’. The failure in voluntarily disclosing any errors in tax returns will attract a fixed penalty (same as in voluntary disclosure) plus 50% of the amount unpaid due to the error, to be compulsorily paid to the authority.
A failure by the business to facilitate Tax audit? – well, the penalty would be AED 20,000. For businesses dealing with imports, not accounting for any tax due on import of goods as required by the law would attract a fine which is 50% of unpaid / undeclared tax.
Any taxable person/business that fails to display prices inclusive of taxes or issue an invoice/tax credit note at the time of supply will be fined AED 15,000 and AED 5000 respectively. Failure in being compliant with conditions related to keeping/moving the goods within/outside the designated zone will be fined at a high of AED 50,000.
Tax registration service and issuance of e-tax registration certificate will be free, but an attestation will cost AED 500. However, tax agents will have to pay AED 3000 fee for registration for three years and AED 3000 for each renewal. The fee for being a registered software provider with the Federal Tax Authority is AED 10,000 annually and each renewal costs AED 10,000.
Source: Federal Tax Authority