The Federal Tax Authority (FTA) amended the Value Added Tax (VAT) penalties in June 2021 via Cabinet Decision No. 49 of 2021. VAT penalties are of different types, such as certain penalties being administrative while the others are tax procedure-related penalties.
This blog will explain the penalties and fines related to the UAE VAT procedures.
| Nature of Violation | Penalty Amount in AED |
| Failure to Maintain Required Records and other documents | AED 10,000 for the first-time AED 20,000 for subsequent violations |
| Failure to Submit Data in Arabic | AED 20,000 |
| Failure to submit VAT registration application within a given timeframe | AED 10,000. |
| Failure to submit VAT de-registration application within a given timeframe | AED 1,000 per month (maximum up to AED 10,000) |
| Failure to inform about the amendment in tax record | AED 5,000 for the first-time violation AED 10,000 for repetition |
| Failure of legal representatives of the taxable person | AED 10,000 from a legal representative’s funds |
| Failure of a legal representative to file VAT return of a taxpayer before due date | AED 1,000 for first-time violation AED 2,000 for subsequent repetition within two years. |
| Late filing of VAT return by a taxpayer | AED 1,000 for first-time offense AED 2,000 for subsequent recurrence within two years. |
| Failure to settle the outstanding VAT in Voluntary Disclosure or Tax Assessment before the given due date | If payment is made within a month after the due date, a penalty of 2% of the unpaid tax If the late payment continues beyond one month, then the penalty of 4% per month up to maximum of 300% of the outstanding tax amount |
| Incorrect return submission | Fixed penalty of AED 1,000 for the first-time violation and AED 2,000 for subsequent offenseMinimum penalty of AED 500 if the differentiating amount of tax is less than the fixed penalty |
| Submission of the Voluntary Disclosure (VD) for errors in return, tax assessment or refund application as per Article 10(1) and 10(2) of the Tax Procedures Law | 5% of the difference if the VD is submitted within 1 year10% of the difference if the VD is submitted within the second year20% of the difference if the VD is submitted within the third year30% of the difference if the VD is submitted within the fourth year40% of the difference if the VD is submitted after the fourth year |
| Failure to Voluntarily Disclose errors in the return, tax assessment or refund application as per Article 10(1) and 10(2) of the Tax Procedures Law before the taxpayer being notified of an audit | 50% of the error amount4% per month of the unpaid tax and the tax returnable to the authority refund for which the entity was ineligible. |
| Failure to facilitate work of a tax auditor | AED 20,000 |
| Failure to calculate tax on behalf of another person as required by the law | If payment is made within a month after the due date, a penalty of 2% of the overdue amount If the failure continues beyond one month, a penalty of 4% per month up to a maximum of 300% of the unsettled tax amount |
| Unaccounted VAT on imports | 50% of unpaid or undeclared tax amount |
The above are the tax procedures-related penalties some of which have undergone significant changes under the amendment. You must know the penalties and fines to keep your organization’s VAT compliant.
Read about the administrative penalties of VAT.
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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.