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Administrative penalties under VAT

Administrative Penalties Under VAT in UAE

The UAE cabinet has approved the complete list of all the administrative VAT Fines and VAT Penalty in UAE that will be imposed on businesses for violations of the VAT laws.  Administrative penalties are additional amounts imposed on a taxable person for breaching the provisions of the VAT Law. Below are some of the actions which invite administrative penalties under VAT in UAE.

 Actions on Administrative Penalties Under VAT in UAE

Actions inviting penalties under VATAdministrative penalty (subjected to change)
When a taxable person fails to display prices inclusive of VAT.15,000 AED
Failure to notify FTA regarding the charge of tax based on margin.2,500 AED
Failure to comply with maintenance of the record of goods within designated zones or moving them to other designated zones.Higher of 50,000 AED or 50% of chargeable tax
Failure to issue a tax invoice or an alternative document when making supply5000 AED for each tax invoice or alternative document
Failure by a taxable person for issuing a tax credit note or an alternative document. 5,000 AED for each tax credit note or alternative document
Penalty for non-registration of VAT 20,000 AED

Read also: How Forensic Accounting in Fraud Examination is Helping Corporate Governance?

Penalty for failing to display the prices inclusive of VAT

Every person eligible for tax should display the price of goods or services taxable, except in the following cases:

  1. The supply is for exports
  2. The customer is a registrant
  3. Import of goods or services.
  • Failure by the taxable person to notify the FTA charge of Tax (based on margin)

A taxable person should calculate tax on the profit margin on the supply of second-hand goods, antique stamps, coins, etc. The profit margin is the difference between the purchase price and the selling price of the goods.

  • Failure to comply with the conditions and procedures related to moving and keeping goods in a designated zone.

A Designated zone is considered outside the state of UAE for the purpose of VAT. As a result, any transfer of goods between designated zones, results in zero VAT levied.

If a VAT eligible business in the UAE fails to register within the specified timeline, it will have to pay a penalty.

A penalty of Dh20,000 shall be applicable to those registrants who fail to submit a registration application within the specified timeframe.

Taxable person’s right to object penalties

Any taxable person has the right to object when any of the above-mentioned penalties are imposed by authorities. A request can be submitted to reconsider the imposition of penalty. A taxable person has to give a valid reason for reconsideration.

Registrant failing to settle any penalties within the specified timeframe can seek the guidance of a VAT expert for further remedy.

VAT registration in UAE

You may also consult a VAT expert to avoid any kind of penalties imposed on your business and also can get better insights on complying with the rules and regulation according to VAT law. Our team has assisted business from many industries effectively manage their tax-related matters and helped avoid VAT penalties. If you are also seeking to help hand for dealing with the VAT-related issues, you can contact us.

Read also: VAT Registration Threshold Calculation in UAE

Ervee is a CPA with international experience in Tax and Accounting. He has over 12 years of experience in accounting and bookkeeping and over a year in VAT implementation, registration, and accounting in UAE. He regularly drives out inefficiencies in company operations and loves the challenge of helping clients find additional ways for an easier and improved compliance and verification of transactions.