New Tax Law In UAE – Installments & Waiver of UAE VAT Administrative Penalties


UAE introduced VAT in 2018, and since then, nearly every businessman has been the target of hefty penalties and fines due to incompliance with VAT regulations. Genuinely speaking, following FTA VAT strict Installment rules can be tough.

Many changes have been made to the UAE VAT FTA rules, whether it is about offering a time extension for non-UAE businesses to forward an application claiming a VAT refund or modifying the voluntary disclosure guide.

But recently, a surprisingly significant change has been made in the UAE tax laws where problems related to penalty waivers and installments were discussed in a new Cabinet Decree No. 105 of 2021 titled ‘Regarding Protocols and Procedures for [Tax] Penalty Installments and Waiver’.

Signed on December 28, 2021, the UAE new tax law was put out in January 2022 in the official gazette and became effective on March 1, 2022.

Now, taxable persons are allowed to resolve their administrative monetary penalty either by requesting a waiver or paying in installments. Considering specific circumstances, a waiver can be permitted for the VAT Penalties compensated in the last 05 years. Moreover, no application for installments or waivers can be accepted if litigation is continued.

According to this law, the Committee holds the power to cancel the installment plan anytime in the case of the taxpayer’s failure to submit the installments on time. For maximum ease, taxable persons in UAE who have asked the authorities for an installment of penalties can request the revision in a plan to make instant amendments. Still, first, the taxpayer must ensure to satisfy the Federal Tax Authority.z

Installments in Administrative Penalties

If you meet the criteria below, your request to pay administrative penalties in installments will get instant approval.

  • You can forward an application for only an unpaid tax penalty.
  • The total sum of unsettled penalties must cross AED 50,000.
  • The taxable person is willing to pay the penalties in full in installments.
  • The unsettled administrative installment penalties shall never be questioned by the TDRC (Tax Disputes Resolution Committee UAE) or the Federal Court.
  • No tax is due for the tax period for which an installment request is being filed.

Request For Penalty Waiver Of Administrative Penalties

If you meet certain conditions, the authorities will permit the waiver for penalties. But Committee will always have the right to cancel the request for authentic reasons. But remember, the Decree never discusses single-person held limited liability businesses.

The waiver will be approved in the following scenarios, or one must comply with the following requirements:

  • If the unsettled administrative monetary penalty is not associated (directly or indirectly) with tax evasion.
  • The taxpayer has never been imposed officially with any restrictions, precautions, or preventative measures from the UAE government or any governmental authorities.
  • Death of a natural business owner or a key employee of a tax registrant, regardless of the cause.
  • If a registered taxable person had already paid the tax before he went into insolvency or bankruptcy.
  • All taxes are paid through another taxable person’s tax account.
  • If the natural registered person, owner of the sole establishment, or a key employee of a tax registrant is severely ill.
  • In case of resignation of the key employee of a tax registrant.
  • No evidence was found concerning constraints on the rights, liberty, and independence of natural taxpayers or establishment owners.
  • No waiver will be accepted if a proof is found against the individual regarding general malfunctioning in the Authority’s systems, reimbursements, or used telecommunication services.
  • In cases of insolvency that was not for purposes of tax evasion.
  • No proof of compliance in the system of the FTA UAE or payment and communication systems.
  • The registered person or the owner of an establishment has the record of “execution of a custodial sentence.”
  • A penalty waiver request is forwarded within the specified time frame suggested by the Committee.

installments plan

Procedures for Submitting Requests

Once you have met the necessary criteria, the taxpayer must fill out the official application forms the Federal Tax Authority UAE asked to request installment plans or a waiver. A taxable individual cannot file more than 01 application for the same penalty/ies.

Generally, the following documents and information are required in the forms:

  1. Personal details include correctly spelled name, updated address, and other information on the taxpayer.
  2. TRN (tax registration number), if applicable.
  3. The amount of penalty.
  4. The details of violations for which you are requesting.
  5. The original date when the penalty was applied to the business.
  6. Authentic reasons behind submitting the request.

Be aware of the common mistakes that can lead to the cancellation of a waiver or installments. Most importantly, you must never breach the undertakings, or else the application will be nullified, and FTA will re-impose the waived VAT penalty payment. The taxable individual is held accountable for filing an undertaking as:

  1. In case of an installment schedule, you MUST ensure that your application states that the installment will be remunerated per the schedule specified by the Committee.
  2. In case of a waiver request, you MUST ensure that your application states that the reasons for the administrative penalties will indeed be mended and corrected. The taxpayer must promise not to make a mistake ever in the future.

Timeline & Committee Decisions

Federal authority of tax takes 40 business days for:

  • Reviewing your request
  • Making sure that your application is in full compliance with official government standards
  • Verifying each control & procedure sketched during the cabinet decision is being followed properly.

If the application is found valid, it shall be sent to the Committee, who takes approx. 60 business days for taking the final decision of approval or cancellation. The applicant will be informed within 10 business days. If you notice a “lack of a decision,” consider it a denial. In case of installment application approval, you will be asked to provide corporate, personal, or bank guarantees.

The Committee is not only accountable for setting the timeline for filing waiver and installment applications but also has a free will to decide how much percentage of administrative penalties will be renounced, the payment dates, the total amount to be waived off, and a new plan against admissible excuse for defiance with the payment schedule.

Providing Cost-Effective Services In VAT In UAE

Profits Plus provides top-tier VAT advisory for optimization. From VAT registration to VAT filing and implementation, our experienced tax advisors, finance experts, and tax accountants ensure that you stay compliant with UAE VAT penalty laws.

No one understands the complexity of VAT registration better than we do. That’s why our VAT services in UAE can save you from suffering an administrative penalty in the future!

Understanding VAT in the UAE 2020

You may know nothing about VAT Accounting, but that doesn’t mean that you should remain ignorant. If you’re a VAT taxpayer, the more you know about it, the more benefit you and your business can derive from it. Here are five essential things that you need to know about VAT in UAE.

VAT Registration and De-Registration

How do you know whether you should register or de-register for VAT? If your turnover is more than AED 375,000 per year, you must register for VAT. If your turnover for the year is under AED 375,000, you are allowed to de-register or apply for voluntary registration. Once you’ve registered for VAT, that’s when a VAT consultant will be useful to you. They can advise you on the latest regulations and keep you and your business on the good side of HM Revenue and Customs.

VAT Schemes

Businesses that are registered for VAT need to account for tax when they invoice customers or when their own suppliers invoice them. HM Revenue and Customs has a number of VAT schemes that allow your business to save time or only account for VAT when they are actually paid. To work out which scheme bests suits you, seek the qualified advice of an experienced VAT advisor.

VAT Records

It is your legal and mandatory obligation to keep accurate VAT records regarding any tax paid or received. You need to keep these records for a fixed number of years and there are penalties for poorly kept records. Keeping accurate VAT records helps you to avoid paying too much tax. To find out more about keeping accurate VAT records, speak to a VAT accounting specialist.

VAT Responsibilities

Do you know what your VAT responsibilities are? If not, you could fall foul of the VAT penalty system. A VAT consultant will let you know your VAT responsibilities and help you to stick to them. You don’t need to be a VAT expert when you have a VAT adviser, they’ll keep you informed of all your responsibilities regarding Value Added Tax.

VAT Penalties

As of 2017, a brand-new VAT penalty system is in place. There are two scenarios under which a penalty will apply. The first is in the case of failure to notify about an under-assessment. This occurs when a VAT Return is not submitted, and Customs have to estimate the assessment. If this assessment is lower than the actual figure it should be and the taxpayer does not inform HM Revenue and Customs, then a penalty is liable.

Second, when someone submits a document that includes an error, this will also trigger a penalty. An error when reasonable care was not taken will be punished with 30% penalty. An error which is deliberate but not concealed from HM Revenue & Customs will be punished with a 70% penalty fine. Finally, an error which is deliberate and where concealment can be proved will result in a 100% fine. By using a professional VAT consultant, you can avoid making mistakes and paying the price for it.

Exemption from VAT

If you have an alternate license in the UAE (LLC or Freezone) and do not function in Dubai and obtain all profits from outside UAE, then you may qualify for exemption from VAT, but you nevertheless MUST practice for this through the FTA. Banks will request this and may also hold repayments as a result. This is also regarded as zero-rated supplies.

To benefit from the expertise and experience of a VAT adviser visit to find out how they can help you manage your VAT accounting.

Zero-Rated VAT for Companies in the UAE

Zero-rated vat agencies based totally in the UAE review their unique VAT application.

There are numerous customers who while being located here in the UAE, are using zero-rated supplies which begs the question, whether this person should consider registering themselves for VAT.

Many clients, who were part of the esteemed profits tax consultants, have been reported to register for vat during the closing of 2019, or else they would have faced banking problems with transactions.

Some of these clients even as far to confess that their institutions made them register for vat as they had large sums of money coming and going via their own accounts.

Which again begs the question that, what is the appropriate approach to registering for zero rated vat?

So we went ahead on your behalf and asked the FTA, their answer is as quoted;

‘If you only make zero-rated supplies, you can also follow to be excepted from registering for VAT.

You still need to complete a VAT registration application, but you should reply “Yes” to the question: “Are you applying for an exception from VAT registration?”

This actually means that if you have an organization in the UAE producing zero rated supplies, then it a dire necessity to have to register for vat in UAE with the FTA. The only problem is the softwares which need to be set up properly for them to work.

Let us put it into perspective that, all of our zero-rated buyers have put in the incorrect vat utility and can no longer declare that they are taking advantage of an exception to the generally followed rules.

Some of our customers have experienced losses or penalties of up to 20,000 AED because of asking for amendments in the wrong way. They failed to realize that all their supposed amendments needed to be made within the 20-day limit set by the FTA

So, it is our profound recommendation that you thoroughly check your initial vat application, and that it was made in the correct order. With that being stated, we can surely rely on the FTA to begin inquiries into companies who stated on their forms, sales of up to 6m AED but failed to reach that milestone.


4 Quick Facts About Registering for VAT in the UAE

THE TRUTH About VAT in the UAE

Registering for VAT in Dubai should not be taken gently and certainly now not regarded section of the process of operating in Dubai, you only need to register if you qualify or if you exceed a threshold. Failing to adhere to the Federal Tax Authorities in Dubai is a serious offense and can incur heavy penalties. Below are 7 records that you have to recognize earlier than registering for VAT in Dubai.

Individual Responsibility

When you register for VAT you are registering the character that is running a business, no longer the enterprise itself. Ultimately it is the character who will be accountable the vat and the duties that come with registering for VAT with the FTA. This duty ought to not be taken lightly and it is eventually linked returned to your Emirates ID.

A character can solely preserve one TRN for VAT purposes at any one time. It is your accountability to make sure that reproduction functions are not submitted.

When do I want to register for VAT?

There is no want to register for VAT with the FTA when beginning your change license. There is so a good deal incorrect advice on this matter. The principles requirements of VAT are constant and consequently, it is no longer a desire to register when setting up a company.

Mandatory Registration – if you meet the following criteria then you must register immediately:

  • Your turnover was once greater than AED 375,000 in the final 12 months; or
  • You anticipate that your turnover will be greater than AED 375,000 in the subsequent 30 days.

Voluntary Registration – if you meet the following criteria then it is your preference alternatively your next 12 months will play a vital element on whether you have to register voluntarily or not:

  • Either your turnover or charges (which will be difficult to VAT) have been extra than AED 187,500 in the ultimate 12 months; or
  • You assume that either your turnover or prices (which will be a challenge to VAT) will be extra than AED 187,500 in the subsequent 30 days.

Exemption from VAT

If you have an alternate license in the UAE (LLC or Freezone) and do not function in Dubai and obtain all profits from outside UAE, then you may qualify for exemption from VAT, but you nevertheless MUST practice for this through the FTA. Banks will request this and may also hold repayments as a result. This is also regarded as zero-rated supplies.

Branches are not separate felony entities

Only the entity of which they are branches practice for registration where that entity meets the applicable criteria. Even if you are running by using branches in extra than one Emirate, only one VAT registration is required.

Updating your details on the FTA portal to avoid AED 15,000 Penalty

keep up to date

AED 15,000 The failure of the Registrant to inform the Authority of any circumstance that requires the change of the information pertaining to his tax record saved by Authority

FTA in Dubai kingdom that if you fail to inform them of adjustments in any situations you will incur a penalty of AED 5,000 initially and AED 15,000 for repeating it.

The principal gadgets that go out of date are as follows:

  • Trade License
  • Emirates ID
  • Possible Passport Copy

The above are fundamental items that should always be updated when they are renewed, however the troubles arise when you are updating the items.

The FTA portal has been updated to make mandatory the need to encompass your financial institution account and power of authority, these objects had been not mandatory when many groups registered for their TRN wide variety in 2017.

Also for some agencies, the FTA uae requires them to grant a monetary announcement to verify the income and fee for the last 12 months. I would surely urge business owners to seek advice from a tax consultant when doing this as many groups are incorrectly registered for VAT and supplying such monetary statements ought to cause the FTA to request other information subsequently leading to a penalty of either AED 10,000 for failing to deregister or AED 3000++ for submitting and mistaken return.

To be sincere this is all it takes to preserve your FTA portal updated and in addition to the above the basics such as contact important points can only be up to date via an electronic mail to the FTA and not thru the portal.

Ali Afzal is the Managing Director and VAT accounting Consultant in UAE for Profits Plus Accountants registered as Profits Accounting and Bookkeeping a British Owner Managed Accounting Firm in Dubai. We manage over 100 clients vat submissions and cater for clients from around the World. We are registered with Xero Cloud Accounting as a Silver Tier Partner and our fees start from AED 850 per month. Contact me on for more information.


VAT Submission Deadline [must know]

vat submission dealine

VAT Submission Deadline

VAT registered business owners have a responsibility to submit their VAT return to FTA on time every 3 months (the first submission period after you register will vary for each company). According to the FTA, AE, fine for the failure of the person conducting Business to keep the required records and other information specified in Tax Procedures Law and the Tax Law is AED 10,000 the first time and AED 50,000 if repeated.

Administrative penalties for violations have been issued by Cabinet Decision No. (40) of 2017 and can be found under the Legislation section on the AE FTA  portal.

VAT Submission Procedure

Every 3 months you need to calculate the difference between your input and output tax and submit the summary to the FTA AE with a breakdown of the emirates in which the sales were generated. Ideally, you should generate a P&L and Balance Sheet at the same time and there is a very good reason for doing this.

Although the deadline to submit your VAT return to the FTA is 28th of the following month after the VAT Period, you should submit the FTA VAT return to the FTA by the 25th. You need to give yourself enough time to make the VAT return payment to the FTA. To learn more about how to make the payment please refer to our blog post on Making A Payment To The FTA.

Profits Plus Accountants

We are a British Accounting Firm in the UAE based in Dubai, we help local businesses to navigate the FTA requirements and we use the most advanced cloud accounting software in the World to make sure that you remain 100% compliant.

Speak to Ali Afzal, a Managing Partner at the firm. You can reach directly on email

Note: is a domain belonging to Profits Accounting and Bookkeeping, an accounting and bookkeeping firm registered with Dubai Economy, Trade License No. 796316.


Profit Margin Tax Scheme [Used Car Sales]

Profit margin tax is a value-added tax (VAT) scheme created by the FTA AE for the benefit of the used goods industry.

The scheme allows VAT to be applied only to the profit portion of the goods sold, provided full VAT has been charged on the goods previously.

Working Example

Ahmed buys a brand new car from a dealer in Dubai. He pays AED 100,000 plus 5% VAT. Regardless of how he purchases the car i.e. full cash or on finance VAT of 5% has been paid on the total value of the car. Now since he is a consumer and not a UAE business that has undergone VAT registration, he will NOT be able to claim for VAT return, according to the FTA rules.

6 months later Ahmed decides to sell the Car to Khaled (a used car dealer) based in Dubai. After agreeing on the price of AED 80,000 Khaled pays Ahmed in cash. Ahmed then sells the car through his showroom for a price of AED 85,000.

Let’s calculate his VAT liability

Purchase Price AED 80,000
Selling Price AED 85,000
Profit AED 5,000
VAT Liability (5% of AED 5,000) AED 250

Common Mistakes

  1. Deducting expenses before calculating the Profit; there is no provision in any FTA portal publications that allow for the deduction of expenses on the used car before calculating the Profit element on which the VAT is applied. Therefore you cannot deduct car polishing, car repairs, and other expenses before calculating the Profit on which VAT is applicable.
  2. Charging Profit Margin Tax to used cars 2017 or earlier; Profit Margin Scheme can only be used for cars where the FULL VAThas been previously applied, therefore since cars previous to 2017 or earlier have not had the full vat applied it is not possible to apply the Profit Margin Scheme to these cars.

NOTE: Profit Margin Tax can still be applied to cars 2017 or earlier but only if the full vat was applied by a used car dealer in the chain of events.

If you are looking for an accountant in Dubai then speak to Ali Afzal, a Managing Partner at the firm. You can reach him directly on

Note: is a domain belonging to Profits Accounting and Bookkeeping, an accounting and bookkeeping firm registered with Dubai Economy, Trade License No. 796316.


What is a FAF File? [FTA Audit File]

fta audit file

The FTA has produced a very concise document on the required functions of accounting software which are needed to produce the FTA Audit files (“FAF”) for VAT and Excise Tax should they ever request it.

What is accounting software?

Accounting software should be a key part of any modern growing business whether a retail store or a service provider and it is not something reserved just for large corporations.

Currently, there are many accounting software solutions being used in the UAE the key players in the market are:

When selecting an accounting solution business owners should ensure that the solution complies with the FTA registration requirements.

Any competent accounting software should be able to produce Sales Invoice, Accounts Receivable, Accounts Payable, and General Ledger but the FTA has very specific requirements, namely the need to generate a FAF File.

FTA Audit File

FAF is something that could be requested by the FTA whilst conducting a periodic audit to ensure that tax and returns have been prepared correctly. It is strongly recommended that businesses check with their software vendors to make sure they are able to produce FTA Audit Files (FAF) if required, otherwise it would be a very costly exercise to do on-demand.

NOTE: It may be possible that your software is able to produce data in FAF but your accounting partner failed to implement and monitor the documenting of the transactions as per the FTA Requirements and you only realize when the FAF is requested at which point it could take weeks to rectify.

Key Elements to be present in the FTA Audit File (FAF) are:

  • Company Information such as Company Name and TRN No.
  • Master Files
    • Supplier File
      • Name of Supplier
      • Location of Supplier by Emirates
      • TRN No. if applicable
    • Customer File
      • Name of Customer
      • Location of Customer
      • TRN No. if applicable
    • Source Documents
      • Purchase Invoices, Imports, Credit Notes (with all details)
      • Sales Invoices, Credit Noted Issued to Customers (with all details)
      • Payments
        • Transaction Date
        • Payment Date
      • General Ledger
      • Product File

In summary, your accounting software must be able to produce all or any of the above if requested by the FTA during a periodic audit of your VAT Return.

Profits Plus Accountants

We are a British Accounting Firm based in Dubai and we help businesses navigate the FTA requirements using the cloud accounting software in the World.

We make sure that you remain 100% compliant.

As a Silver Partner of Xero Cloud Accounting Software, we have a local team based in Dubai with over 20 years of experience (collectively).

If you are looking for an accountant in Dubai then speak to Ali Afzal, a Managing Partner at the firm. You can reach him directly on

Note: is a domain belonging to Profits Accounting and Bookkeeping, an accounting and bookkeeping firm registered with Dubai Economy, Trade License No. 796316.

VAT Registration in Dubai [Key Errors To Avoid]

VAT Registration can be complex and getting it wrong could mean that your application is ‘denied’ or you incur a penalty for incorrect submission. Getting it right could be a small matter of the dates or just a better understanding of the requirements.

Mandatory Threshold

Ultimately if you are an existing business and in the last 12 months your sales exceeded AED 375,000 then you must register for VAT. This is considered mandatory registration. If however, your sales in the last 12 months were below AED 375,000 but above AED 187,500 then you can still register for VAT registration on a voluntary basis. The other mandatory requirement applies to expected sales of over AED 375k in the next 30 days. Remember that the sales are taxable sales and not sales that are not considered taxable supplies. If you are unsure if your sales are taxable or not then please contact a specialist to make sure since many services are taxable EVEN if they were delivered to clients outside the UAE.

Creating USER ID and Password

Firstly, you need to create a user name and ID which is a very simple process and takes only 5mins. You can do that by visiting this link: Once registered you have to wait for the confirmation email to be sent to your email address used in the registration. Note: please do not forget your email ID and PW or security questions as this is not an easy problem to resolve.

Section 1 – About the applicant

Key mistakes made in this section are what to select when the trade license is a professional license? From our experience, we have had no problems with selecting Legal person – Other and then entering Sole Establishment in the ‘If other, please specify’ section. Also it is very important to select Mandatorily v’s Voluntarily. Only select Mandatorily if your past sales are over AED 375,000 otherwise always select Voluntarily. Always select no to Tax Group unless you are registering for a Tax Group (may apply if you have more than 2 companies in the UAE).

Section 2 – Details of the applicant

Legal entity name needs to be exact and do not worry about the Arabic as you can go to the DED website here: and actually search your trade name and copy and paste the Arabic wording. Trade License information should be exact and the rest of this section is pretty straightforward.

Section 3 – Contact details

A simple point to note here is that whatever contact number is entered here will receive regular updates and notifications from the FTA in UAE.

Section 4 – Bank Details

Bank accounts are now a mandatory requirement to complete the FTA registration application for VAT registration in UAE and therefore if you do not have a business bank account then you cannot complete the application process.

Section 5 – Business Relationships (optional)

This section has always been optional and therefore we always choose not to complete this section.

Section 6  – About the VAT Registration in UAE

Very important section and a ‘must get right’ section. Select the closest activity as you will not always find the right activity.

Turnover is your gross sales for the last 12 months – NOT 12 months of 2017 – but the 12 months till the date of application. You will need provide a sales report and feel free to use our template letter VAT registration in UAE.

Expect turnover in the next 30 days, try to keep it as realistic as possible.

For those of you who do not Import or Export then its simple NO, NO, NO, NO for all questions relating to Import & Export.

Section 7 – Declaration

The declaration will require you to enter all your details again and it does always ask for Proof of Authorization and in the past we have always uploaded the Visa Page of the Manager in this section as it effectively confirms that the person has a Manager Visa from the company and typically this seems to work as a POA to manage the affairs of the company.

If you are operating in the name of a local sponsor then you really need to get a Power of Authority letter drafted and signed by the sponsor giving you authority to act on behalf of the company ‘on all matters relating to a VAT registration in UAE and the FTA’ or use this template.

Section 8 – Review and Submit

I would recommend that you take a printout of the initial submission and review in detail against all IDs and make sure that it is 100% correct. This will save you weeks in time if it is submitted incorrectly.

Once submitted you must make sure that you always have access to the email ID used in the initial registration process as this is where all communication will be sent as well as the mobile number used.

The standard time is taken for the FTA in UAE to respond is 20 working days and they normally revert much sooner. Just expect that it can take up to 30 days in total for the VAT registration in UAE to complete.

If you have any amendments then it is ideal to make them sooner than later.

Profits Plus Accountants

We are a British Accounting Firm based in Dubai and we help businesses navigate the FTA requirements using the most advanced cloud accounting software in the World.

We make sure that you remain 100% compliant.

As a Silver Partner of Xero Cloud Accounting Software, we have a local team based in Dubai with over 20 years of experience (collectively).

If you are looking for an accountant in Dubai then speak to Ali Afzal, a Managing Partner at the firm. You can reach him directly on

Note: is a domain belonging to Profits Accounting and Bookkeeping, an accounting and bookkeeping firm registered with Dubai Economy, Trade License No. 796316.