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The UAE Federal Tax Authority imposes fines and penalties upon taxable persons for noncompliance to tax regulations and standards. Thus it is advisable and imperative for taxable persons to avail of the services of accredited tax consultants in UAE to navigate and combat tax complexities and stay compliant with VAT Laws.
Under what circumstances are administrative penalties imposed on taxable persons in the UAE?
As conferred by the UAE VAT law, the following violations accrue fines and penalties upon taxable persons:
| Actions inviting penalties under VAT | Administrative penalty (subject to change) |
| Failing to keep the specified information as per the Federal Tax Law secured and recorded. | 10,000 for the first time and 20,000 in the case of repetition. |
| Failing to provide the authority with the data, records, and papers pertaining to taxation in Arabic when required. | 20,000 |
| The Taxable Person failing to file a registration application by the deadline set forth in the Tax Law. | 10,000 |
| When a registrant fails to deregister through an application within a period stated by the Federal Tax Law. | 1,000 in the event of a delay, and each month on the same day following that, up to 10,000 at most. |
| The person designated as the Taxable Person’s Legal Representative fails to submit a tax return by the deadline. The legal representative’s personal funds will be used to pay the fines. | 1,000 for the first violation and in case of repetition within 2 years, 2,000. |
| Failing to inform the authority of a person’s appointment as a Legal Representative within a specified period. The penalty shall be fined from the representative’s personal funds. | 10,000 AED |
| The Taxable Person’s failure to pay the Due Tax mentioned in the filed Tax Return, Voluntary Disclosure, or the Tax Assessment he was informed of within the term stipulated in the Tax Law. stored by the Authority. | The Taxable Person shall be obliged to pay the penalty applicable to late payment of Payable Tax up to a maximum of 300%, pursuant to the following: a. 2% of the unpaid Tax shall be due on the day following the due date of payment, where the settlement of Payable Tax is late. b. The 4% monthly penalty is due after one month from the due date of payment, and on the same date monthly thereafter, on the unsettled Tax amount to date. 2. For the purposes of this penalty, the due date of payment in the case of the Voluntary Disclosure and Tax Assessment, shall be as follows: a. 20 business days from the date of submission, in the case of a Voluntary Disclosure. b. 20 business days from the date of receipt, in the case of a Tax Assessment. |
| The Registrant’s submission of an improper Tax Return. | A fixed penalty shall be applied: 1,000 for the first time. 2,000 in case of repetition. 2. As an exception to Clause 1 of this penalty, if the incorrect Tax Return results in a Tax difference less than the fixed penalty listed in Clause 1 of this penalty, a penalty equal to the Tax difference of at least 500 shall be imposed. 3. Anyone correcting their Tax Return prior to the due date of payment shall be excluded from the penalty imposed under Clauses 1 and 2 of this penalty. |
| The filing of voluntary disclosure by the taxpayer of inaccuracies in a refund application, tax assessment, or tax return in accordance with Articles 10(1) and 10(2) of the Tax Processes Law. | Without prejudice to the potential consequences of the penalty mentioned in Clause 10 of this Table, a percentage based penalty shall be applied on the difference between the Tax that was calculated and that which should have been calculated, pursuant to the following: 1. 5% on the difference, where the Voluntary Disclosure is submitted within one year from the due date of submission of the Tax Return, the Tax Assessment, or the relevant refund application; 2. 10% on the difference, where the Voluntary Disclosure is submitted within the second year following the due date of submission of the Tax Return, the Tax Assessment, or the relevant refund application; 3. 20% on the difference, where the Voluntary Disclosure is submitted within the third year following the due date of submission of the Tax Return, the Tax Assessment, or the relevant refund application; 4. 30% on the difference, where the Voluntary Disclosure is submitted within the fourth year from the due date of submission of the Tax Return, the Tax Assessment, or the relevant refund application; 5. 40% of the difference, where the Voluntary Disclosure is submitted after the fourth year from the due date of submission of the Tax Return, the Tax Assessment, or the relevant refund application. |
| The failure of the Registrant to calculate Tax on behalf of another Person where the Registrant Taxable Person is obliged to do so under the Tax Law | The Registrant shall be obliged to pay the penalty applicable to the late settlement of Payable Tax up to a maximum of 300%, pursuant to the following: a. 2% of the unpaid Tax is due on the day following the due date of payment, where the settlement of Payable Tax is late. b. the 4% monthly penalty is due after one month from the due date of payment, and on the same date monthly thereafter, on the unsettled Tax amount to date. 2. For the purposes of this penalty, the due date of payment in the case of Voluntary Disclosure and Tax Assessment, shall be as follows: a. 20 business days from the date of submission, in the case of a Voluntary Disclosure. b. 20 business days from the date of receipt, in case of a Tax Assessment. |
Read also: How Forensic Accounting in Fraud Examination is Helping Corporate Governance?
Do Taxable Persons Have a Right to Submit a Reconsideration Request on a VAT Penalty?
The imposition of administrative penalties against a taxable person is subject to objection. If the request for reconsideration is made by the taxable person to the authority within 20 working days of the decision being communicated to him, the authority may grant it completely or in part. It is advisable to look for a reliable VAT consultancy in Dubai to understand the repercussions of VAT penalties in UAE.
Does the Federal Tax Authority Waive or Reduce an Imposed Administrative Penalty?
The Federal Tax Authority may reduce or waive an imposed administrative penalty under certain circumstances which are as follows:
- If the Individual taxable person has a valid justification to present before the respective Authority.
- If the taxable person offers proof to support the defense and the infraction it resulted in, which prompted the implementation of administrative penalties.
- Within ten working days following the expiration of the appropriate cause, the reduction or waiver application must be reported to the Authority using the procedure outlined by the Authority.
- The applicant must not have received any administrative penalties in the two years prior to submission.
- The person must provide proof that the violation has been fixed.
Seek the Expert Services of Top Tax Consultants in the UAE
For taxable persons to stay compliant with VAT regulations and standards and to avert penalties for noncompliance, it is highly imperative and advisable to seek the expert services of top tax consultants in UAE. Therefore, contact us today and we shall be happy to assist you.
