Federal Tax Authority (FTA) is the only organisation of UAE that decides the amounts and percentages for fines and penalties every year and looks after all the tax procedures to resolve disputes. Companies are penalised upon finding a case of proven violation where they have either failed to fulfil the requirements or has breached the VAT (Value Added Tax) Law.
Penalties come with brilliant discounts for offering an opportunity to companies to come forward and make their errors known. Or else, an audit will be performed, and if any error is found, they will be fined heavily.
8 Fines and Penalties Under VAT
- Failure to meet Registration Requirements
The business should be mandatorily registered one month before reaching the turnover limits, only if the total amount of the taxable expenses crosses a registration threshold of AED 375,000. The unregistered business will be penalised with a late registration fee worth AED 20,000/- as per the VAT Law.
- Late or no VAT Deregistration
In case of failure to deregister in the specified time of 20 days (counting the days from the deregistration is applicable), a fine worth AED 10,000/- will be asked from a taxable person.
- Problems with VAT Return
- A penalty of AED 1,000/- is applicable to the taxable person in case he fails to file or files for a VAT return after the 28th of the end of the tax period. If he forgets to file the return again, the fine is doubled to AED 2,000/- for the second time.
- FTA will levy two administrative penalties if the taxpayer voluntarily reveals errors in their previous Tax Return assessment through a disclosure form 211 and shows the under- or unpaid tax of AED 10,000/- or more.
- Fixed penalty worth 3,000 for the first mistake and 5,000 for making the same mistake the second time.
- Percentage-based penalty decided on the basis of the unpaid amount. 5% and 30% for making a voluntary- disclosure before and after getting an official notice of the tax audit, respectively. 50% of registrants who never use disclosure form and their errors are caught during the tax auditing.
- Display of Prices
An administrative penalty worth AED 15,000 applies to the taxable person who decides to display the price of the goods but disagrees with the Value Added Tax Law and puts the costs of the company’s supplies or services without tax inclusion.
- Failure to Keep the Records or Submission of Information
A VAT-registered person is held accountable for maintaining accurate documents to prove the authenticity of the official transactions. He must provide the genuine documents to Federal Tax Authority when asked. In case of carelessness, he will be charged:
- First time: AED 10,000/-
- Second time: AED 50,000/-
If FTA asks for submission of financial records in Arabic and taxpayers fails to deliver, AED 20,000/- is levied.
- Failure to Notify About Charge of Tax Based on The Margin
A failure to inform the FTA about the total amount of calculated tax on selling used goods, antique pieces, or collectors’ items invites an administrative penalty of AED 2,500. It is essential to be transparent in trade due to the differences in profit margin observed between purchasing and selling prices.
- VAT in Designated Zones
VAT Laws are inapplicable in Designated Zones, but they have their own rules. The non-compliance to the rules will lead the taxpayer to an administrative penalty worth AED 50,000. In higher-level violation, the penalty increases to 50% of the chargeable tax.
- Issues with Electronic Tax Invoices and Electronic Tax Credit Notes
A penalty worth AED 5,000 (for each invoice or Note) is applicable on the taxpayers who:
- Was unable to issue Tax Invoice or Tax Credit Note electronically
- Was unable to meet the requirements for issuing accurate electronic Tax Invoice or Tax Credit Note
- Was unable to secure a valid copy of the original electronic Tax Invoice
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