What are the fines for VAT non-compliance in the UAE? Are there other fees to consider?

The UAE Council of Ministers has adopted Cabinet Decision No.39 of 2017 on Fees for Services Provided by the Federal Tax Authority (FTA) and Cabinet Resolution No.40 of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE.

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Registration fees

Tax registration services and the issuance of an electronic tax registration certificate will be free of charge. The registration fee for tax agents is set at AED 3,000 for three years. The registration and renewal fee for an accounting software provider will be AED 10,000 for one year and registration in a designated zone will cost AED 2,000 per year. Although there are no service fees associated with registering a warehouse keeper or issuing an electronic warehouse keeper registration certificate, an official printed certificate will cost AED 500.

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Fines for VAT non-compliance

It has been stated that fines would not be less than AED 500 and no more than three times the amount of tax due. Failure to retain accounting records will result in an initial fine of AED 10,000 for the first offense and AED 50,000 for repeated offenses. Furthermore, where an Arabic translation of transactions, records, and information is not supplied when requested by the FTA, a fine of AED 20,000 would be issued. The failure to submit the tax return within the prescribed timeframe may result in a fine of AED 1,000 in the first instance which would then be followed by an AED 2,000 fine in the case of repeat violations within 24 months. Failure to register for tax within the prescribed time limit will be accompanied by a fine of AED 20,000. Failure to settle any taxes payable will result in a late payment penalty of 2 percent of the unpaid tax due immediately. The decision also makes it clear that 4 percent must be paid on the seventh day following the deadline for payment while there will be a daily 1 percent penalty charged on any amount that is still unpaid one calendar month after the deadline with an upper ceiling limit of 300 percent. An incorrect tax return submitted will incur a fine of AED 3,000 in the first instance followed by an AED 5,000 fine for repeated filing of incorrect tax returns. A fine of AED 5,000 will also be charged for not issuing tax invoices and tax credit notes.

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Fines relating to Free Zones

For VAT relating matters, an entity that fails to comply with the conditions and procedures relating to keeping taxable goods within designated zones or moving them to another designated zone will result in a fine of the higher of AED 50,000 fine or 50% of the tax.

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The payment date of Fines and Appeals

It should also be noted that fines payable are separate from the tax which is due. The taxable person however is also given the chance to appeal against any decisions related to fines they have incurred.

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Other fines

Failure to display prices with the VAT will incur a fine of AED 15,000 and failure of a taxable person to issue a tax invoice will incur a fine of AED 5,000. It is therefore crucial for businesses to prepare early and to seek professional advice when preparing for VAT. For more information and to get the latest updates on VAT in the UAE, subscribe to our email list or like our LinkedIn page. Click here for a free VAT consultation.

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DISCLAIMER

This article has been written in general terms and therefore cannot be relied on to cover specific situations; application of the principles set out will depend upon the particular circumstances involved and we recommend that you obtain professional advice before acting or refraining from acting on any of its contents.

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