New VAT Fine and Penalty in UAE
New VAT Fine and Penalty in UAE
With recent amendments, especially Cabinet Decision No. 49 of 2021, the UAE’s Federal Tax Authority (FTA) has improved its approach to Value Added Tax (VAT) fines and penalties, indicating a dedication to both compliance and business recovery. The amendments offer businesses the chance to reduce penalties while highlighting the significance of adhering to VAT regulations.
The FTA's Two Goals: Economic Assistance and Compliance
The revised fine and penalty system of the FTA has two functions:
• Encouraging Compliance: The FTA seeks to discourage non-compliance, promote accurate record-keeping, and guarantee timely submissions by providing explicit and appropriate sanctions.
• Helping Business Recovery: The FTA has implemented measures to lessen financial difficulties through penalty reductions and discounts in recognition of the effects of incidents such as the COVID-19 epidemic.
Key Changes in VAT Fines and Penalties
The FTA has revised several administrative penalties, providing relief to businesses while maintaining the integrity of the VAT system. Here’s a comparative overview:
| Fields | Old Fine and Penalty | New Fine and Penalty |
|---|---|---|
|
Late VAT Registration |
AED 20,000 |
AED 10,000 |
|
Failure to Maintain Proper Books of Accounts |
AED 10,000 (first offense) AED 50,000 (repetition) |
AED 10,000 (first offense) AED 20,000 (repetition) |
|
Late VAT Deregistration |
AED 10,000 |
AED 1,000 (initial delay) AED 1,000 per month thereafter (max AED 10,000) |
|
Failure to Inform Authority of Tax Record Amendments |
AED 5,000(first offense) AED 15,000 (repetition) |
AED 5,000(first offense) AED 10,000 (repetition) |
|
Failure of Legal Representative to Inform Authority of Appointment |
AED 20,000 |
AED 10,000 |
|
Submission of Incorrect Tax Return |
AED 3,000(first offense) AED 5,000 (repetition) |
AED 1,000(first offense) AED 2,000 (repetition) |
|
Submission of VAT Voluntary Disclosure |
AED 3,000(first offense) AED 5,000 (repetition) |
AED 1,000(first offense) AED 2,000 (repetition) |
|
Late VAT Payment Penalty |
2% immediate 4% after 7 days 1% daily (max 300%) |
2% immediate 4% monthly |
Key areas that didn't change
• Not providing data in Arabic when asked to do so.
• The legal representative’s delay in filing a tax return.
• The registrant’s late submission of their tax return.
• Inability to assist tax auditors in their task.
• Someone who fails to account for the tax owed on imported products.
Understanding VAT Compliance
Most goods and services are subject to VAT, which was implemented in the United Arab Emirates in 2018 at a standard rate of 5%. those with taxable supply over AED 375,000 per year are required to register for VAT, whereas those with taxable supplies between AED 187,500 and AED 375,000 are free to do so.
The Best Ways to Avoid VAT Penalties
Businesses should do the following to guarantee compliance and stay out of trouble:
• Remain Up to Date: Stay up to date on FTA rules and revisions.
• Preserve Accurate Documents: Put in place reliable accounting and documentation processes.
• File and Pay on Time: Comply with VAT return and payment dates.
• Make Use of FTA Resources: For clarification, consult FTA FAQs and guidelines.
• Seek Professional Assistance: For knowledgeable advice, speak with tax agents or auditors.
• Benefit from Discount Programs: make use of early payment discounts and penalty redetermination schemes.
Redetermination and Discount on VAT Fines
Opportunities for penalty reduction are provided by the FTA:
- Penalty Redetermination Scheme: This program permits previous administrative penalties to be reduced by 70%.
- Early Payment Discount: If you pay within 15 days of the due date, you’ll receive a 5% reduction in late payment penalties.
How IBR Group Accountants can help you?
To ensure that businesses will always run smoothly and optimally, our tax experts have managed and regulated numerous problems and offered the finest solutions to the firms. to be a licensed tax agency in the nation, indicating that the company complied with the strict rules set by the government to be a tax agent in the United Arab Emirates. Additionally, we offer the VAT services in the United Arab Emirates, including VAT auditing, VAT accounting, VAT return filing, VAT refund services, and VAT deregistration.