All the registered businesses in the UAE are subject to FTA tax laws and VAT regulations. New companies who are struggling with new VAT regulations must get a consultation because in case of non-compliance, businesses will have to face hefty penalties as imposed by the FTA.
In case of non-compliance of VAT and Tax regulations in UAE, tax authorities have imposed penalties ranging from AED500 to thousands of dollars. The article gives an insight into several violation instances and penalties associated with such acts.
Penalties and Fees for VAT Non-compliance in UAE
The UAE Cabinet has provided a list of administrative penalties that will be imposed in case of non-compliance and violation of tax laws by the businesses in UAE. The following are the details of the Cabinet resolution provided by the FTA on penalties for violations of laws.
FTA Fees Structure
According to the Federal Tax Authority, tax registration service and issuance of the e-tax registration certificate will be free of charge, but an attestation will incur a fee of Dh500. Tax agents will have to pay the Dh3,000 fee for registration and renewal for three years. Following are the details:
| No. | Description | Fee AED | Frequency |
| 1 | Issuing of an attested tax registration certificate | 500 | Per certificate |
| 2 | Listing of a Tax Agent in the Tax Agent Register. | 3,000 | For 3 years |
| 3 | Renew Listing of a Tax Agent in the Tax Agent Register | 3,000 | For 3 years |
| 4 | Registration of Software provider with the Federal Tax Authority. | 10,000 | For 1 year |
| 5 | Renew the registration of Software provider with the Federal Tax Authority | 10,000 | For 1 year |
| 6 | Registration of Designated Zone, in accordance with the provisions of Federal Decree-Law No. (7) of 2017 on Excise Tax. | 2,000 | For 1 year |
Penalties for Violating Tax Procedures and VAT
Following are the administrative penalties imposed by FTA on certain tax procedure violations including VAT:
| No. | Violation Description | Penalty AED | Frequency |
| 1 | Failure of the person conducting business to keep the required records and other information specified in Tax Procedures Law and the Tax Law | 10,000 50,000 | for the first time. in case of repetition. |
| 2 | 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 | |
| 3 | Failure of the Taxable Person to submit a registration application within the timeframe specified in the Tax Law | 20,000 | |
| 4 | Failure of the Registrant to submit a deregistration application within the timeframe specified in the Tax Law | 10,000 | |
| 5 | 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. | 5,000 150,000 | for the first time. in case of repetition. |
| 6 | Failure of the person appointed as a Legal A representative for the Taxable Person to inform the Authority of his appointment within the specified timeframe. The penalties will be due to the Legal Representative’s own funds. | 20,000 | |
| 7 | 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 to the Legal Representative’s own funds. | 1,000 2,000 | for the first time. in case of repetition. |
| 8 | Failure of the Registrant to submit the Tax Return within the timeframe specified in the Tax Law. | 1,0002,0002% 4% 1% | for the first time.in case of repetition.· (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.· (1%) daily penalty charged on any amount that is still unpaid one calendar month following the deadline for payment with the upper ceiling of (300%). |
| 9 | 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 Law. The Taxable Person shall be obligated to pay a late payment penalty consisting of | 3,000 5,000 | for the first time. in case of repetition. |
| 10 | Submission of an incorrect Tax Return by the Registrant. Two penalties are applied: | Fixed Penalty of:· 3,000· 5,000Percentage-Based Penalty (on the amount unpaid to the Authority):50% 30% 5% | for the first time. in case of repetition *(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 a 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. |
| 11 | 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 of Law. | Two Penalties:Fixed Penalty:· 3,000· 5,000Percentage-based penalty (on the amount unpaid to the Authority):50% 30% 5% | For the first timeIn case of repetition. (50%) if the Person/Taxpayer makes a voluntary disclosure after being notified of the tax audit and the Authority starting the tax auditor after being asked for information relating to the tax audit, whichever takes place first. (30%) if the Person/Taxpayer makes the voluntary disclosure after being notified of the tax audit but before the start of the tax audit. (5%) if the Person/Taxpayer makes a voluntary disclosure before being notified of the tax audit by the Authority. |
| 12 | Failure of the Taxable Person to voluntarily disclose errors in the Tax Return, Tax Assessment, or Refund Application before the Tax Audit. | Two Penalties:Fixed Penalty:· 3,000· 5,000Percentage-based Penalty:50% | For the first timeIn case of repetition. 50% of the amount unpaid to the Authority due to the error |
| 13 | 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 | |
| 14 | 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 incur a late payment penalty as follows:2% 4% 1% | 2% of the unpaid tax is due immediately once the payment is late. 4% of the amount of tax which is still unpaid is due on the seventh day following the deadline for payment. 1% daily penalty will be charged on any amount that is still unpaid one calendar month after the deadline for payment, up to a maximum of 300%. |
| 15 | Failure to account for tax due on import of goods as required under the tax law | 50% | 50% of unpaid or undeclared tax. |
| 16 | Failure by the Taxable Person to display prices inclusive of tax. | 15,000 | |
| 17 | Failure to comply with the conditions and procedures related to transferring the Excise Goods from a Designated Zone to another Designated Zone, and the mechanism of processing and storing of such Excise Goods. | 50,000 or 50% | The penalty will be the higher of AED 50,000 or 50% of the tax if any, unpaid on the goods as the result of the violation. |
| 18 | Failure by the Taxable Person to provide the Authority with price lists for the Excise Goods produced, imported or sold thereby. | 50,000 20,000 | For the first time In case of repetition |
| 19 | Failure by the Taxable Person to notify the Authority of applying tax based on the margin. | 2,500 | |
| 20 | Failure by the Taxable Person to issue the Tax invoice or an alternative document when making any supply. | 5,000 | Or each tax invoice or alternative document. |
| 21 | Failure by the Taxable Person to issue a Tax Credit Note or an alternative document. | 5,000 | For each tax credit note or alternative document. |
| 22 | 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. |
Get VAT Consultation and Avoid Penalties!
All registered business owners and taxpayers must be aware of UAE VAT laws and penalties imposed by the FTA. The best way to ensure that your business is falling all tax laws in the UAE is to consult with a VAT expert or tax agent in the UAE to avoid hefty penalties.
VAT consultants in Dubai are equipped with the latest industry development news and tax trends. These experts can facilitate you with VAT registration and compliance to protect your business from penalties.
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