Penalty for Late Payment of VAT in UAE

Penalty for late payment of VAT

Businesses operating in the UAE must pay the VAT tax and file the VAT returns before the deadline. By the deadline, usually the 28th of the month after the end of the tax period, businesses must submit the VAT to the FTA. If the company fails to meet the deadline, it must face Penalty charges for late VAT payment in UAE. A fixed penalties and daily penalties are included in these penalties.

The UAE FTA has introduced a new VAT late payment penalty in UAE. The authority has introduced new fines and penalties to motivate companies to avoid more fines by ensuring VAT compliance. These penalties help companies to recover businesses from the impact of the COVID – 19.

If you want to know about the penalties or Late payment fees for VAT in UAE, you have opened the right page. You will get everything about the consequences of late VAT payment in the United Arab Emirates at this place. In addition, we will highlight the new rules regarding the penalties for VAT late payment fees in the UAE.

VAT Late Payment Penalty – overview

As mentioned above, you should submit the VAT returns before the deadline. If you fail to submit the VAT returns before the submission deadline, a delay penalty of AED 1,000 will be assessed for delays that occur for the first time.  If numerous violations happen within 24 months, the fine will become double to AED 2,000 for each violation.

The Federal Tax Authority (FTA) might share a tax assessment for delays with an estimated of the owned tax to failure to file a VAT return by the deadline. Upon issuance of the tax assessment (if applicable), the taxable person must pay any payable tax assessed, penalties for a failure to file a tax return, and Penalty charges for late VAT payment in UAE.

The taxable person must pay the late payment penalty of the payable tax up to a maximum of 300 per cent for the following factors:

• A monthly penalty of 4 per cent will be applied to the outstanding balance on the same day every month beginning one month after the payment is due.
• Once the payment of the payable tax is past due, two percent of the unpaid tax is due the day after that date.

If you have any confusion about the VAT payment delay consequences,  consult a tax consultant, like Flyingcolour

Other Circumstances Lead Businesses to be Subject to VAT penalties

Indeed, VAT late submission fines in UAE are popular for the late submission of VAT returns. However, other circumstances lead a company to VAT penalties. The list of circumstances for the VAT penalties is listed below:

• Failing to follow the conditions & process relevant to the issuance of electronic tax invoices and electronic tax credit notes
• Not displaying tax-inclusive prices on tax invoices
• Failing to notify the FTA to apply tax based on the margin
• Failing to follow the conditions & procedures relevant to the transfer of goods in designated zones
• Not keeping the financial records as instructed by the tax law
• Not submitting documents in Arabic when needed by the FTA
• In case of any errors in a tax refund or tax return by a company, submitting the VAT Voluntary disclosure
• Failing to issue a tax credit note or alternative document
• Failing to account for tax due on import of products or goods as per the tax law.
• When supplying, failing to issue a tax invoice or an alternative document
• Late registration of VAT
• Late De-registration of VAT

Apart from these circumstances, there are other circumstances that can lead you to VAT penalties.

New Rules for Penalty charges for late VAT payments in UAE

The FTA has decreased old Late payment fees for VAT in UAE.  This reduction will help companies to review their VAT errors and fix them to avoid VAT Penalties. The following is the list of new VAT penalties  in the UAE:

1. Late VAT registration fine: AED 10,000
2. Failure to maintain a proper book of accounts:  AED 10,000 for the first time and AED 20,000 for the repetition
3. Failure to submit the records, data, and documents connected to Tax in the Arabic language to the Authority when requested: AED 20,000 when Amended
4. Failure to tell the Authority of any circumstance that needs the amendment of the information of its Tax record kept by the Authority:  AED 5,000 for the 1st time and AED 10,000 for repetition
5. Late VAT Deregistration fine:  AED 1,000 for delay, and on the same date monthly up to a maximum of AED 10,000
6. Failure of the Legal Representative of the Taxable Person to tell the Authority of its appointment as Legal Representative under the specified timeframe, the Penalties will be due from the Legal Representative’s funds:  AED 10,000
7. The person not accounting for any Tax that might be because of the import of goods according to the Tax Law:  50 percent of unpaid or undeclared tax.
8. Submission of a VAT Voluntary Disclosure by the Person or Taxpayer on errors in the Tax Return, Tax Assessment, and Refund application:  AED 1000 for the first time and AED 2,000 for repetition
9.  Failure of the Person performing Business to boost the work of the Tax Auditor:  AED 20,000 (when amended)
10. Late VAT payment penalties:

• A 2 per cent of the unpaid tax is due instantly.
• A 4 per cent monthly penalty is due after one month from the due date of VAT payment and on the same date monthly on the unsettled Tax amount to date.

1. Failure of the Registrant to submit the Tax Return under the deadline specified in the Tax Law:  AED 1000 for the first time and AED 2000 for the repetition within 24 months
2. Failure of the Legal Representative for the Taxable individual to file a Tax Return under the specified deadline:  AED 1,000 for the first time and AED 2,000 for repetition within 24 months. (Not amended)
3. Submission of the incorrect tax return by the applicant: AED 1000 for the 1st time and AED 2,000 if repeated.

How can Flyingcolour Tax Consultants help you?

Indeed, filling out VAT returns on time is crucial to avoid Late payment fees for VAT in UAE. However,  business people might forget to fill out the Tax return before the deadline because of their busy schedules. Flyingcolour Tax Consultant can remind you to pay your VAT return to the relevant authority before the deadline. In addition, we will help you to avoid any kind of VAT penalties in this country.

To learn more about the Penalty for late payment of VAT in UAE, book a free consultation with one of the Flyingcolour team advisors, simply call +971 50 5585305 or send WhatsApp messages to +971 4 4542366. you can also drop an email to info (at) flyingcolour (dot) com.

This article was published on 19-03-2024. The information provided in the article is based on the policies and rules applicable at the time of writing it. Talk to one of our consultants for any recent updates or changes.