VAT Fines in Dubai, UAE | SF Tax Consultancy

Consequences Of VAT Violations In The UAE

Non-compliance with UAE VAT laws result in specific fines and penalties. It is crucial for every taxpayer to understand the situations that can trigger these penalties, as enforced by the Federal Tax Authority (FTA).

VAT penalties in the UAE are imposed for failing to adhere to the administrative procedures that must be followed under the country's tax laws and regulations.

Advisory And Compliance Guidelines

VAT, a widely implemented consumption tax, is applied to nearly all goods and services. Recognizing the need for economic diversification and revenue generation, the UAE government introduced Value-Added Tax (VAT), which covers most goods and services, with exceptions for healthcare, food, and education. Although the VAT burden ultimately falls on the end consumer, businesses must adhere to the necessary systems, processes, and procedures to comply with the legal requirements effective from January 2018.

Understanding and Preventing VAT Late Penalties

Administrative Penalties

These fixed penalties apply to specific violations, regardless of the tax amount involved. Examples include:

Failure to register for VAT when required: AED 20,000
Late submission of VAT returns: AED 1,000 for the first offense, AED 2,000 for repeated offenses within 24 months
Failure to display prices inclusive of tax: AED 15,000

Percentage-Based Penalties

These penalties are calculated as a percentage of the unpaid or underpaid tax due to errors. Examples include:

Late Payment of VAT:
- 2% of the unpaid tax, due immediately
- 4% on the seventh day after the deadline
- 1% daily penalty on any remaining unpaid amount after one calendar month, up to a maximum of 300%
Submission of incorrect tax returns resulting in a tax understatement:
- 50% of the understated amount if the error is less than 30% of the total tax due
- 30% if the error is between 30% and 50% of the total tax due
Voluntary disclosure of errors leading to a tax understatement or refund claim:
- 5% of the tax amount if disclosed within one year
- 30% if disclosed between one and two years 50% if disclosed after two years

Daily Penalties

These penalties are imposed daily for ongoing violations, such as failing to cooperate during a tax audit or not providing required information to the Federal Tax Authority (FTA). Over time, these penalties can accumulate, significantly increasing the financial burden on non-compliant businesses.

Navigating the VAT Refund Scheme for UAE Businesses

The VAT refund scheme in the UAE is designed to help businesses recover VAT paid on expenses, even if they are not VAT registered. This scheme allows non-VAT registered businesses to claim refunds for VAT incurred on eligible expenses such as trade shows, exhibitions, import and export activities, and other business-related costs. Managed by the Federal Tax Authority (FTA), the refund process can be completed through the FTA’s online portal. The scheme aims to support the UAE business community by boosting economic competitiveness, encouraging foreign investment, and promoting exports. We are available to assist you with preparing and reclaiming VAT for your business in the UAE.

Can Foreign Businesses Apply for VAT Refunds?

Foreign businesses that are not VAT-registered in the UAE but have incurred VAT on eligible expenses during their operations in the country may qualify for a VAT refund. To be eligible, the foreign business must

Not have a place of establishment or fixed establishment in the UAE or any VAT-implementing GCC state.
Not be a taxable person in the UAE.
Be registered with a competent authority in its home jurisdiction.
Have incurred VAT on expenses in the UAE, subject to certain conditions and limitations.
Meet additional requirements specified by the Federal Tax Authority (FTA).

We can assist you in submitting a refund application to the FTA as an authorized tax agent. The FTA will review your application and supporting documents before issuing a refund, provided your business meets all eligibility criteria and requirements.

Actions Inviting Administrative Penalty Under VAT	Penalty Amount (AED)
Failure to register for VAT when required	20,000
Late submission of VAT returns	1,000 for the first offense 2,000 for repeated offenses within 24 months
Failure to display prices inclusive of tax	15,000
Failure to issue tax invoices when required	10,000
Failure to maintain required VAT records	5,000
Incorrect issuance of tax invoices	10,000
Non-compliance with VAT audit requirements	10,000
Failure to update VAT registration details	5,000
Failure to submit required documents during a tax audit	15,000
Failure to submit a tax return within the specified period	1,000 for the first late submission 2,000 for subsequent late submissions within 24 months

We offer thorough assistance with VAT penalties, including preparing and submitting appeals to reduce or waive penalties. Our commitment to client satisfaction, meticulous attention to detail, and extensive knowledge of UAE VAT laws and regulations establish us as a trusted partner for businesses needing VAT-related services.

As a seasoned and dependable VAT consultancy firm in the UAE, we provide a wide range of VAT services, including VAT refund and penalty management. Our team of skilled VAT experts is proficient in handling all aspects of VAT refund claims, including the preparation and submission of necessary documentation to the Federal Tax Authority (FTA).

Compliance Requirements Under UAE
Commercial Company Law and VAT Regulations

UAE Company Law Requirements

Under Article 26 of the UAE Commercial Company Law No. 2 of 2015, companies are required to retain their accounting records for a minimum of five years from the end of the financial year. Failure to maintain records as per Article 348 may result in fines ranging from AED 50,000 to AED 500,000. Additionally, Article 349 stipulates fines between AED 20,000 and AED 200,000 if records are not kept for the required five-year period.

VAT Compliance Requirements

Invoice Verification: Ensure that taxable items are correctly billed by suppliers and that invoice details are accurate.
Tax Application: Apply the appropriate VAT rate on sales and deduct input tax to determine the tax payable.
Tax Payment: Settle the computed tax within the government-mandated deadlines.
VAT Returns: Submit VAT returns with necessary information within the specified time frame.
Record Maintenance: Keep detailed records of invoices, stock, VAT returns, and other relevant documents to substantiate the tax paid during purchases.

VAT Fines and Accountant Responsibilities

Proper handling of stock, invoices, and other records is crucial to avoid VAT fines. Accountants play a critical role in ensuring compliance with VAT regulations and maintaining accurate accounts and records according to company laws. This includes managing filing systems, software updates, due dates for tax collection, and remittance.

Why Choose Sarah Ferguson's VAT Penalty Services in Dubai

As registered tax agents with the Federal Tax Authority, we are recognized as a leading and certified tax consultancy firm in the UAE, serving a diverse range of clients. VAT fines in the UAE require careful management. If your company faces VAT penalties, our tax experts are here to help. We specialize in addressing VAT fines, working to reduce or eliminate them, and providing timely advice on navigating changes in VAT laws and regulations. Our team is highly qualified in UAE tax law and its practical application. We recognize that each business has unique needs, and we offer tailored solutions to meet those needs effectively. Partner with us to safeguard your business from VAT fines and foster its growth!

What Our Customers Say About Us

GEORGE T.

The staff at Sarah Ferguson were absolutely amazing. They are professional individuals and love what they do. They take care of their clients and I have no trouble working with them. Highly recommend them for your tax consultancy.

ANNA

Sarah Ferguson consultancy really helped us in our time of need. We contacted them and they were ready to help us at such short notice. Never have I ever seen anyone who was so easy to work with. I've recommended them to a few of my friend's companies to get their VAT registration sorted out. Thank you again.

AHMED G.

Thank you Sarah Ferguson for taking care of registering our company. She looked after us as if it were her own business. Right from the consultation till the end she was available at all times to clear any questions we had. Appreciate it!

JENNY A.

I thankful to an acquaintance for recommending taxconsultancy.ae to register my business for the VAT implementation this coming January. I feel secure that we are in good hands and nothing can go wrong. Thanks to the team for the effort.

Frequently Asked Questions

A VAT penalty is a fine imposed by the UAE Federal Tax Authority (FTA) for non-compliance with VAT regulations. This could include late VAT registration, failure to submit VAT returns on time, incorrect VAT filings, or late payment of VAT liabilities. Such penalties can lead to significant financial costs, damage to your business reputation, and increased scrutiny from tax authorities, potentially affecting your business operations.

At Sarah Ferguson Tax Consultancy, we offer comprehensive VAT compliance services to help you avoid penalties. Our team of experts ensures accurate VAT filings, timely submission of returns, and proper maintenance of records. We provide continuous support and guidance to help your business stay compliant with the latest VAT regulations, minimizing the risk of incurring penalties.

The costs associated with resolving VAT penalties can vary depending on the nature and severity of the non-compliance. They may include administrative fines, daily penalties for continued non-compliance, and legal fees if disputes arise. Our services aim to mitigate these costs by promptly addressing VAT compliance issues and negotiating with tax authorities on your behalf to resolve penalties efficiently.

Yes, we assist businesses of all sizes, from small startups to large corporations, in managing and resolving VAT penalty issues. Our expertise in UAE tax laws enables us to provide tailored solutions that meet the specific needs of each business, ensuring compliance and minimizing financial risks associated with VAT penalties.

Using a professional service like Sarah Ferguson Tax Consultancy for VAT penalty resolution offers several benefits, including expert knowledge of VAT laws, efficient handling of penalty disputes, and proactive compliance strategies to avoid future penalties. Our experienced team can save your business time and resources, reduce stress, and ensure accurate and timely responses to the Federal Tax Authority.

The daily VAT penalty can vary based on the specific non-compliance issue. In some cases, the penalty for late payment of VAT may be a percentage of the unpaid tax amount per day, accumulating until the issue is resolved. Specific penalty rates are outlined by the UAE Federal Tax Authority and are subject to change. It's essential to maintain compliance to avoid these daily fines, and our team is here to help you navigate these regulations effectively.

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Consequences Of VAT Violations In The UAE

Advisory And Compliance Guidelines