Significance of VAT non-Compliance in UAE

Value Added Tax (VAT) was implemented in the United Arab Emirates on January 1, 2018, at a 5% Standard rate. As a result, businesses are required to fulfill specific guidelines and regulations in order to comply with the VAT law. The mandates deal with submitting returns, incorrect submissions, VAT registration, and other compliances.

Enterprises that neglect to adhere the regulations may face penalties. Businesses that are registered with the VAT must be aware of all the possible violations of the UAE VAT Law in order to prevent non-compliance and penalties.

We provide you with a quick overview of the many VAT law violations that can occur as well as the corresponding fines that the FTA will apply

Failure to register

Within 30 days of reaching the statutory registration level, businesses in the United Arab Emirates must submit a Tax Registration application to the FTA.

Companies who miss the registration deadline will be fined an administrative penalty for late registration of AED 20,000 in addition to additional fines based on percentage-based late filing and non-payment of past-due VAT liabilities.

Delays in filing VAT returns

At the conclusion of each tax period, all taxable individuals must submit a VAT return to the FTA in the United Arab Emirates. The requirements provide that the VAT Return must be received by FTA by the 28th day after the end of the Tax Period.

The VAT registrant who neglects to file their VAT return within the FTA-mandated timeline will be subject to a penalty of AED 1,000. If the defaulter commits the same offense again within 24 months, they will also have to pay a penalty of AED 2,000.

FTA has made it necessary for firms operating in the United Arab Emirates to keep accurate records of all transactions, along with supporting documentation, if they are not keeping books of records. When the FTA asks them or during the tax audit, pertinent papers must be provided

A business owner faces a first-time penalties of AED 10,000 if they do not produce the required accounting documents for their enterprise. The law stipulates that if the same individual is discovered breaking the rule twice, they would be fined AED 50,000.

VAT payment delay

Companies in the United Arab Emirates are required to pay VAT by the deadline for filing returns, also known as the VAT return deadline.

The following late payment penalties will be applied to the registrant: Once the payment is past due, 2% of the unpaid tax is required immediately. If the sum is still overdue one calendar month after the payment deadline, a 1% daily penalty will be applied, up to 300%

Refusing to display the prices of goods that include VAT

In certain cases, it is required by UAE VAT that the price of goods or services listed in their stores or offices include VAT.

If the pricing of goods or services are not shown with taxes included, there will be an administrative penalty of AED 15,000/-

incorrectly filed tax returns

If you submit an incorrect tax return, you will be penalized AED 3,000 the first time, and AED 5,000 each time you make the same mistake.

Depending on how soon the submitter notifies the Authority of the error regarding the tax audit, fines based on the percentage of the tax amount unpaid to the tax authorities owing to the submission error may be levied. These penalties can range from 5%, 30% to 50%.

Not providing a tax credit notice and tax invoice

The client who is in charge of paying VAT must receive from the Supplier a pertinent tax invoice or tax credit note.

An administrative penalty of AED 5,000 would be imposed for each inaccurate document if the provider did not follow this method while issuing electronic tax invoices and credit notes.

Failure to De-register.

If, within 13 months of registering for VAT, an individual's or company's annual turnover or taxable expenses fall below the threshold, they may choose to deregister.

AED 10,000 is the penalty for not submitting an application for a mandatory de-registration within the allotted period, which is 20 working business days from the date of the event that makes the tax payer entity eligible for de-registration.

Businesses who violate the VAT requirements risk fines and penalties. In order to prevent the company from suffering penalties, businesses need to be aware of the rules and make sure that deadlines and submission dates are met. Hiring a qualified VAT expert in the UAE who can provide advice on the VAT issues.