Gone are those days when you could get away with non-compliance with the tax laws. In keeping with the times, the Federal Tax Authority (FTA) in UAE has published regulations regarding the soon-to-be-implemented VAT laws in the country that state the administrative penalties to be imposed on each type of tax violation. Being aware of what is to come in case of discrepancies in tax returns or tax evasions in UAE is thus the need of the hour for businesses that wish to prosper in the Middle East.
According to Cabinet Resolution No. (40) of 2017, the Administrative Penalties are the monetary fine imposed on individuals or businesses found to be in non-compliance with the new VAT laws that will come into effect from 1 January 2018 in UAE. The Resolution details the nature of the violation of the tax law and the respective Administrative Penalty for each offence clearly and has provisions for repeat offenders for the same violations.
We will help you to be fully prepared for bracing the impacts of VAT implementation on your business with our expert guidance and consultation. Our team of highly qualified accountants and dynamic business minds will review and assess your business first and then provide customised VAT consultation that suits your requirements. From VAT accounting and calculations to filing returns, we will be with you every step of the way!
The FTA has brought out three detailed tables for the different types of administrative penalties, each of the tables corresponding directly to the upcoming tax reforms in UAE. The first table contains all the tax impeachments pertaining to the implementation of the new tax laws in the country, the second table details the tax violations with regard to Excise Tax, whereas the third table speaks about the tax evasion and discrepancies related to the implementation of VAT in the country.
| Administrative penalties for tax violations pertaining to the implementation of Federal Law No. (7) of 2017 on Tax Procedures in UAE | |
|---|---|
| Description of the tax violation | Administrative penalty imposed (in AED) |
| The incompetence of an individual conducting business in the UAE to keep the necessary records and other important information mentioned in the Tax Procedures Law and Tax Law. | 10,000 for the first instance 50,000 for the repeat offence |
| The failure of an individual conducting business in the UAE to present the tax-related information, records and documents to the Authority in Arabic when requested. | 20,000 |
| The incompetence of a taxable individual to register with the Authority within the timeframe mentioned in the Tax Law. | 20,000 |
| The incompetence of a taxable individual to register with the Authority within the timeframe mentioned in the Tax Law. | 20,000 |
| The incompetence of a Registrant to submit an application for deregistration within the stipulated timeframe as mentioned in the Tax Law. | 20,000 |
| The failure of a Registrant to inform the Authority of any circumstance that calls for an amendment or modification to the tax-related information that is with the Authority. | 5,000 for the first instance 15,000 for the repeat offence |
| The incompetence of an individual to inform the Authority of his appointment as a Legal Representative of a taxable individual in the UAE within the stipulated timeframe mentioned by FTA. The administrative penalty will be charged to the Legal Representatives’ own funds. | 20,000 |
| The incompetence of an appointed Legal Representative to file a Tax Return within the mentioned timeframe for the taxable individual. The administrative penalty in cases like these will be due from the funds of the respective Legal Representative. | 1,000 for the first instance 2,000 for repeating the same action within the next 24 months |
| The failure of a Registrant to submit the Tax Return within the stipulated timeframe mentioned in the Tax Law | 1,000 for the first instance 2,000 for repeating the same action within the next 24 months |
| The incompetence of a taxable individual to settle the payable tax specified in the submitted tax return or tax assessment he/she was informed of, within the timeframe stated in the Tax Law | 2% of the due tax is added immediately to the amount of payable tax once the payment is late. 4% of the unpaid tax is due on the seventh day following the deadline for payment. 1% of the unpaid tax is charged daily as a penalty on the unpaid amount of payable tax one calendar month following the deadline for payment. It can go up to 300% of the unpaid amount if the tax is avoided. |
| Submission of an incorrect tax return by the Registrant | Two penalties are charged for this violation of the Tax Law. 1. The first one is a fixed penalty of 3,000 for the first time 5,000 for the repeat offence 2. The second penalty is charged based on the following factors 50% of the payable tax will be charged as fine if the Registrant does not disclose the fact voluntarily or makes a voluntary disclosure after being notified of the tax audit and the FTA has begun the tax audit process, or after being requested to submit information relating to the tax audit – whichever occurs first. 30% of the payable tax will be charged as a penalty if the Registrant makes a voluntary disclosure after being notified of the tax audit and before the Authority starts auditing the tax. 5% of the payable tax will be charged to the Registrant if he/she makes a voluntary disclosure before being notified of the tax audit by the FTA. |
| The case of voluntary disclosure by an individual (taxpayer) of the errors in the tax assessment, tax return or refund application under the Article 10 (1) and (2) of the Tax Procedures Law. | Two penalties are charged for this violation. 1. A fixed penalty of: 3,000 for the first instance 5,000 for the repeat offence 2. A percentage-based penalty depending on the following factors. 50% of the payable tax will be charged as fine, if the individual fails to disclose the fact voluntarily, or makes a voluntary disclosure after being notified of the tax audit and the Authority has begun the tax audit process, or after being requested to submit information relating to the tax audit – whichever occurs first. 30% of the payable tax will be charged as a penalty if the taxpayer makes a voluntary disclosure after being notified of the tax audit and before the Authority starts auditing the tax. 5% of the payable tax will be charged to the individual (taxpayer) if he/she makes a voluntary disclosure before being notified of the tax audit by the Authority. |
| Non-disclosure of the errors in tax assessment, tax return, or refund application under the Article 10 (1) and (2) of the Tax Procedures Law before being notified that it will be subject to a Tax Audit by the Authority | Two Penalties are charged for this violation of the Tax Procedures Law.
1. A fixed penalty is charged amounting to: 3,000 for the first instance 5,000 for the repeat offence 2. 50% of the amount that is unpaid to the Authority due to an error leading to a tax benefit for the individual (taxpayer) |
| Obstructing or not the job of the Tax Auditor by an individual conducting business in the UAE found to be in violation of the provisions of the Tax Procedures Law, Article (21). | 20,000 |
| Miscalculation of Tax by a Registrant on behalf of another individual when the Registrant taxable individual is bound to do so under the Tax Law | 2% of the due tax is added immediately to the amount of payable tax once the payment is late 4% of the unpaid tax is due on the seventh day following the deadline for payment 1% of the unpaid tax, charged daily as a penalty on the unpaid amount of payable tax one calendar month following the deadline for payment. The amount may go up to 300% of the unpaid amount if the tax is avoided |
| Administrative penalties for non-compliance with the implementation of Federal Decree-Law No. (7) of 2017 | |
|---|---|
| Description of the tax violation | Administrative penalty imposed (in AED) |
| Failure to display prices of inclusive tax by a Taxable individual. | 15,000 |
| Non-compliance with the conditions and procedures related to the transfer of the Excise Goods from a designated zone to another designated zone, and the procedure of processing and storing such Excise Goods. | 50,000 or 50% of the payable tax, chargeable depending on the goods as the result of the violation, whichever is the higher amount |
| The incompetence of a taxable individual to provide the Authority with the lists of prices for the Excise Goods produced, imported or sold. | 50,000 for the first occasion 20,000 for the repeat offence |
| Administrative penalties for tax violations with regard to Federal Decree-Law No. (8) of 2017 on Value Added Tax (VAT) | |
|---|---|
| Description of the violation | Administrative penalty of fine for the violation (in AED) |
| The failure by a taxable individual to display prices inclusive of VAT | 15,000 |
| The failure by a taxable individual to notify the Authority of applying for tax based on the margin | 2,500 |
| Non-compliance with the conditions and procedures related to the storage and transfer of goods within designated zones. | The penalty shall be the higher of 50,000 or 50% of the total payable tax, chargeable depending on the goods as the result of the violation. |
| The incompetence of a taxable individual to provide a mandatory tax invoice or similar document | 5,000 for each tax invoice or similar document |
| The failure of a taxable individual to issue a tax credit note or a similar document | 5,000 for each tax credit note or similar document |
| Non-compliance with the conditions and procedures pertaining to the issuance of electronic tax invoices and electronic Tax Credit Notes | 5,000 for every inaccurate document |
Need help with expert VAT consultation for your business? We are here to help you with our host of the best financial and accounting minds in the industry. With our deft accounting acumen and business finesse, we will be able to help you with all VAT-related issues with your business. In the times of new tax reforms and regulations making their way into the economy of the country in UAE, we are here to assist and guide you through every step of the way. Here is how our qualified team of financial experts can lend you a helping hand through the transition phase of making your business absolutely VAT-ready in the light of the upcoming tax reforms and regulations in the UAE.
You can avail a thorough and detailed review and assessment process from us for your business right before jumping the VAT bandwagon in UAE for understanding the reforms and how they affect your business model at present.
Following the initial review and assessment of your business records, we will be able to provide our able guidance and in-depth consultation for the necessary modifications that need to be in place to fit your existing business model into the newly-announced VAT regulations framework in UAE.
As you may be aware, businesses need to register for VAT under the FTA following certain guidelines as per the nature and revenue of the business. We can take care of the entire registration process on your behalf, including preparing the documents that you will need for the process.
We also offer splendid services pertaining to the VAT calculations and filing the tax returns for all the VAT needs as suited to your business model. Following the FTA-provided format, you can rely on us for efficient VAT calculation as well as submitting the tax returns on time that lets you avoid the administrative penalties.
You can get a certified VAT expert assigned solely for handling the requirements of your business in these tumultuous times of change. You will be able to get in touch with the exclusive VAT expert any time you wish for practical and prompt solutions for all the tax and accounting needs for your business.
Our legal team have years of experience in handling tax-related cases in the courts, even the highest of the judiciary systems, for solving all the legal issues and formalities that you may need in light of the new VAT laws.
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