What are the penalties related to VAT?

Are you worried about the penalties related to VAT for errors such as late filing of returns and incorrect collection of taxes from your customers?

Such worries are quite natural and the authorities are making all efforts to ease your difficulties in adjusting to the new system. If you have doubts, it is always better to be in touch with the tax help-desks or tax experts, rather than relying on your guess estimates and attracting penalties.

In fact, you can make changes in your VAT filing details later, provided it is done within a reasonable time-frame of the filing and acted on immediately noticing such an error.

Let’s now take a look at the penalties for various errors:

The Federal Tax Authority has decided a minimum penalty of AED 500 and a maximum of not more than triple of the tax value, to be levied on any kind of tax violation.

The penalties are charged over:

Non-Registration:

AED 20,000 will be charged over businesses for not registering for VAT on time.

A penalty of AED 10,000 over those registrants failing to submit a de-registration application.

Late Return Filing:

Registrants failing to submit VAT return will have to pay:

• AED 1,000 for the first offense
• AED 2,000 for repetition within 24 months

There will be a late-payment penalty of:

• 2% of the unpaid tax, if payment is made immediately after the deadline
• 4% of the unpaid tax, if payment is made on the seventh day or beyond following the deadline
• 1% daily penalty (not more than 300%) on due tax if the tax is still unpaid one month following the deadline

Non-disclosure of Tax Due on Imports:

• 50% of the unpaid tax will be charged as penalty

Submission of incorrect tax return or non-disclosure of errors:

Failure in disclosing errors voluntarily in return filing can charge a penalty of

• AED 3,000 for the first time
• AED 5,000 on repetition.

Incorrect information provided over voluntary disclosure will be charged

• AED 3,000 for the first time
• AED 5,000 on repetition.

Non-disclosure of Errors in Tax Records:

• AED 5,000 will be charged for the first time
• AED 15,000 on repetition.

Non-Maintenance of Accounting Records:

If tax records and related information’s are not maintained, a penalty of

• AED 10,000 will be charged for the first offence
• AED 50,000 on repetition.

If the taxpayer fails to produce proper tax data, records and documents in Arabic, an amount of AED 20,000 will be charged as penalty.

Incorrect Pricing and Misplacing Taxable Goods:

In case of displaying incorrect prices over items inclusive of the excise tax, a penalty amount of AED 15,000 will be charged by the authorities.

A penalty of AED 50,000 will be charged if taxable goods are kept out of the designated zone as per the conditions and procedures specified for it.

Penalties are also charged over:

• Failure in informing the authority about the appointed as a Legal Representative for the Taxable Person within the specified timeframe an amount of AED 20,000 is charged.
• Failure of Legal Representative for the Taxable Person to file a Tax Return within the specified timeframe an amount of
• AED 1,000 will be fined for the first time
• AED 2,000 in case of repetition within 24 months.
• AED 5000 will be charged on failure in issuing the Tax invoice or an alternative document when making any supply. (for each)
• AED 5000 will be charged over the failure to issue a Tax Credit Note or an alternative document. (for each)
• Failure by the Taxable Person to comply with the conditions and procedures regarding the issuance of electronic Tax Credit Notes and electronic Tax Invoices AED 5000 will be charged for each incorrect document.

If you have any doubt about penalties related to VAT, don’t hesitate to call us on 04 443 1604