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Consequences of late or non-filing VAT in UAE

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The penalty for vat registration dubai are getting less harsh, but there is still a frightening variety of VAT enforcement authorities that may catch naïve registered firms off guard and throw them into bankruptcy. It's possible to prevent being an unknowing victim by being aware of all the potential issues and by making a well-thought-out strategy.


Tax Returns for VAT-Registered Companies



VAT-registered enterprises in the United Arab Emirates face the following breaches and penalties:


Whenever a corporation or its legal agent fails to file a VAT return by a deadline set by the FTA, a penalty will be assessed to that person. The first violation carries a fine of AED 1,000, whereas a second infraction within twenty-four months of the first carries a fine of AED 2,000.


A penalty of AED 1,000 will be assessed for the first violation, and AED 2,000 for a repeat offence in the next twenty-four months after the first offence, for failing to file a VAT return on time.


Those who fail to pay VAT as indicated in their tax assessment or tax return by the time provided by the VAT Act will be subject to a late payment penalty. The firm must promptly pay the FTA two percent of any outstanding taxes. Following the tax payment deadline, 4% will be required. Every day that vat registration is not paid within a calendar month of the due date will result in a 1% penalty. The highest penalty for failing to pay VAT on time is 300%.


The penalty for filing incorrect tax returns is set at AED 3,000 for the first violation. AED 5,000 is the punishment for a second or subsequent violation. In addition to the set penalty, a percentage-based penalty will be levied on a firm. VAT-registered businesses that fail to submit a voluntary declaration of their unpaid taxes face a penalty of 50% of the outstanding amount, regardless of whether or not the FTA has already begun the audit process. If the VAT-registered firm admits the mistake willingly after the FTA has received notice for a tax audit and the tax audit has not yet commenced, the penalty is 30% of the amount not paid to the authority. If a company voluntarily discloses an outstanding tax debt before receiving notice of an audit from UAE tax authorities, it will be subject to a penalty of 5% of the unpaid debt.


Registrations that are submitted after the deadline


When your taxable turnover surpasses the necessary registration level for the previous twelve months, you must notify the Federal Tax Authority (FTA) of your need to register for VAT. AED 375,000 is the registration barrier in the UAE. For those who anticipate crossing the barrier shortly, it is possible to begin the process of registering. Regardless of the explanation or justification you may have for the delay in notifying the tax office of your vat registration uae, you will be penalised. Your company will face a fine of AED 20,000.



Note: FTA discretion may allow for reduction of the penalty based on individual circumstances, and the extent of mitigation will be determined on the specifics of each instance.



Registration for VAT in UAE has now been completed.


Every firm in the uae vat registration must ensure that it is on time and proper in dealing with taxation:


Is there someone in the company that oversees VAT accounting and ensures that new products are handled correctly for VAT?


Input and output taxes must be appropriately documented in your company system.


Input tax claims can be supported by sufficient proof, but is there a way to ensure this?


What happens if VAT isn't levied on the supplies made? Is this valid in law?


Input tax that isn't deductible, such as VAT for business entertainment, motor vehicles or exempt items, is there a mechanism in place?


Is VAT usually included into contracts before they are signed?




A VAT-registered firm or its legal agent may appeal against fines, assessments, and the amount of interest that the FTA charges. Initially, the FTA will conduct a local and independent appeal. The FTA has the ability to mitigate in certain situations. Tax must be paid before an appeal may be heard if it is against the application of penalties or interest. Unless a firm can prove that it is unable to pay because of financial difficulty, this is the case.



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