The Federal Tax Authority (FTA) announced its decision to impose heavy VAT fines &
penalties in UAE when a business violates the VAT laws.

Each vat fine in UAE, as
approved by the UAE cabinet, will be no less than 500 AED, no more than triple of the
actual tax value or that mentioned in the other list of administrative penalties.

Thus,
to steer clear of such instances, it is always important for a businessman to know the
different circumstances that might lead to the imposition of UAE VAT penalties for
violating its laws.

Fines/penalties are charged on businesses for non-compliance of
the administrative procedure which must be strictly followed by a taxable person.

1. Any person engaged in the supply of goods that is taxable & falls under the
mandatory VAT registration threshold in the UAE, then those individuals must
get themselves registered under VAT and obtain a Tax Registration Number
(TRN).

2. Those individuals who fail to register for VAT within 30 days from reaching the
the specified turnover limit will be charged a late registration fine of AED 20,000/-

3. When a taxable person stops engaging in the supply of taxable supplies or if
their taxable turnover is less than the voluntary registration limit for the last 12
months, they must apply for VAT de-registration.

If this is not completed in 20
business days from the date of the event, then a penalty of AED 10,000/- will be
charged on such businesses.

4. Sellers or businesses are required to display the prices of goods for sales which
are inclusive of VAT.

Failure to do so will lead to the seller being charged with a
the penalty of AED 15,000/- The final amount a customer has to pay for a
the commodity is the maximum price displayed in the retail outlet which is
inclusive of VAT.

5. According to the UAE VAT law, the seller or retailer who is tax registered will be
held accountable for issuing tax invoices or tax credit notes to the customers.

Failure to do so will result in the authorities levying a penalty of AED 5,000/-
on the seller for each tax invoice or tax credit note.

6. Not submitting VAT returns within the 28th of every month (following the tax
period) will lead to a penalty of AED 1,000/- for the first time and if repeated it
would be doubled to AED 2,000/- The tax registered person must make the
payment to the FTA within the deadline mentioned for VAT return or the due
date for filing returns.

VAT late return filing penalty in UAE is 2% on the unpaid
amount post the due date and an additional 4% will be levied on them if it has
not been paid even after 7 days from the deadline.

If the tax registered person
fails to pay within a month’s time, 1% will be charged on a daily basis until the
penalty reaches 300% of the payable tax amount.

7. An amount of AED 10,000/- will be charged for the first time if the taxable
a person fails to keep & manage all the records or transactions for every
transaction.

If repeated for the second time, the penalty will be raised to AED
50,000/- (these records must be submitted to FTA or during tax audit and
failure to do so results in being charged with a fine/penalty).

8. Businesses are expected to submit documents translated in Arabic as per the
the request put forward by FTA.

They can maintain their records & documents in
English or Arabic provided they submit the same in accordance with the FTA’s
request.

Else, a penalty of AED 20,000/- will be imposed on them.

The Federal Tax Authority (FTA) has the right to reduce or remove penalties imposed on
a taxable person if they can produce any evidence justifying their reason for not
complying with the provisions of VAT law.

In such cases, the authority might waive or
reduce such penalty as mentioned in the Executive Regulations of the law.

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