Administrative Penalties under UAE VAT Law

  • Fri 18 Feb 2022 | By : Flyingcolour
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The Federal Tax Authority (FTA) amended the penalties of the Value Added Tax (VAT) in June 2021 via Cabinet Decision No. 49 of 2021. The amendment has reduced specific VAT penalties while some penalties have increased in addition to the allowance of more time to settle the non-payment of tax before FTA imposes any penalty.

This blog will explain the administrative VAT penalties applicable as prescribed under the UAE VAT law.

What are VAT Penalties?

FTA imposes VAT penalties for any violations made against any rule or regulation of the law. The nature of violations of the law is of different types. Hence, the authority has categorized the VAT penalties in UAE into two categories: Administrative Penalties and Penalties on Tax Procedures. 

Types of Penalties

The Administrative Penalties are imposed on a taxpayer when he breaches the law from a tax administration viewpoint, such as failure to display price inclusive of VAT, failure to issue tax invoices, etc. 

In contrast, the Penalties on the Tax Procedures are levied for breaching the law on procedural aspects such as failure to apply for registration, late payment of VAT, etc.

Administrative Penalties of VAT

The cabinet decision prescribes reduced penalties for certain administrative violations. Below are the administrative penalties imposed by the FTA on a taxpayer for violating the provisions of the UAE VAT law:

S. No. Nature of Violation by the TaxpayerAmount of Penalty AED
1Fail to display prices inclusive of VAT (Except Import of goods/services, Export supply, VAT-registered customer)5,000
2Fail to calculate VAT on profit margins in supply of specific items as specified in the profit margin scheme (second-hand goods, antiques, stamps, coins, etc.) 2,500
3Fail to comply with the procedures in keeping goods at Designated Zones*Higher of the following: 50,000, or50% of the tax chargeable 
4Fail to issue tax invoices or alternative documents while supplying goods2,500 per tax invoice, or alternative document
5Fail to issue tax credit notes or alternative document 2,500 per tax credit note or alternative document
6Fail to comply with the provision related to electronic tax credit notes or tax invoices. 5,000 per electronic tax invoice or tax credit note 

Regular assessment and proper tax planning can save taxpayers from paying penalties. Tax management of the entities regarding the on-time filing of tax returns, auditing (if liable to), and paying taxes can also improve the goodwill in the industry. 

How Can We Help?

At Flyingcolourtax, we have a dedicated team of tax experts who can guide you on UAE VAT compliance matters. Our qualified professionals can also assist you in accounting, auditing, company registration, and PRO requirements. 

Register your free consultation with us to learn

more about the comprehensive services we offer. 

To learn more about Administrative Penalties under UAE VAT Law, book a free consultation with one of the Flyingcolour team advisors.

Disclaimer: The information provided in this blog is based on our understanding of current tax laws and regulations. It is intended for general informational purposes only and does not constitute professional tax advice, consultation, or representation. The author and publisher are not responsible for any errors or omissions, or for any actions taken based on the information contained in this blog.

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