Administrative Penalties

What are Administrative Penalties?

Administrative penalties are monetary amounts imposed upon a person by the Federal Tax Authority (FTA) for breaching the provisions of the Tax Law. Every taxable person is urged to fully comply with their VAT responsibilities. Administrative penalties for non-compliance and violations have been issued by Cabinet Decision No. (40) of 2017. The Federal Tax Authority shall issue administrative penalties assessment for a person and notify him within (5) five business days for any of the violations.

When shall Administrative Penalties be imposed?

Administrative Penalties shall be imposed on the violations listed in the tables (1), (2) and (3).

Tables of Violations and Administrative Penalties Appendix to the Cabinet Decision No. (40) of 2017

Table (1): Violations and Administrative Penalties related to the Implementation of the Federal Law No. (7) of 2017 on Tax Procedures.

	Description of Violation	Administrative Penalty (AED)
1	The failure of the person conducting Business to keep the required records and other information specified in Tax Procedures Law and the Tax Law.	(10,000) for the first time. (50,000) in case of repetition.
2	The failure of the person conducting Business to submit the data, records and documents related to Tax in Arabic to the Authority When requested.	(20,000)
3	The failure of the Taxable Person to submit a registration application within the timeframe specified in the Tax Law	(20,000)
4	The failure of the Registrant to submit a deregistration application within the timeframe specified in the Tax Law	(10,000)
5	The failure of the Registrant to inform the Authority of any circumstance that requires the amendment of the information pertaining to his tax record kept by Authority.	(5,000) for the first time. (15,000) in case of repetition
6	The failure of the person appointed as a Legal Representative for the Taxable Person to inform the Authority of his appointment within the specified timeframe. The penalties will be due from the Legal Representative’s own funds.	(20,000)
7	The failure of the person appointed as a Legal Representative for the Taxable Person to file a Tax Return within the specified timeframe. The penalties will be due from the Legal Representative’s own funds.	(1,000) for the first time. (2,000) in case of repetition within (24) months.
8	The failure of the Registrant to submit the Tax Return within the timeframe specified in the Tax Law.	(1,000) for the first time. (2,000) in case of repetition within (24) months.
9	The failure of the Taxable Person to settle the Payable Tax stated in the submitted Tax Return or Tax Assessment he was notified of, within the timeframe specified in the Tax Law.	The Taxable Person shall be obligated to pay a late payment penalty consisting of: -(2%) of the unpaid tax is due immediately once the payment of Payable Tax is late; -(4%) is due on the seventh day following the deadline for payment, on -(1%) daily penalty charged on any amount that is still unpaid one calendar month following the deadline for payment with upper ceiling of (300%).
10	The submittal of an incorrect Tax Return by the Registrant	Two penalties are applied: 1. Fixed penalty of: (3,000) for the first time. (5,000) in case of repetition
11	The Voluntary Disclosure by the Person/Taxpayer of errors in the Tax Return, Tax Assessment or Refund Application pursuant to Article 10 (1) and (2) of the Tax Procedures Law.	Two penalties are applied: 1. Fixed penalty of: (3,000) for the first time. (5,000) in case of repetition
12	The failure of the Taxable Person to voluntarily disclose errors in the Tax Return, Tax Assessment or Refund Application pursuant to Article 10 (1) and (2) of this the Tax Procedures Law before being notified that he will be subject to a Tax Audit.	Two penalties are applied: 1. Fixed penalty of: (3,000) for the first time. (5,000) in case of repetition
13	The failure of the Person conducting Business to facilitate the work of the Tax Auditor in violation of the provisions of Article (21) of the Tax Procedures Law.	(20,000)
14	The failure of the Registrant to calculate Tax on behalf of another Person when the registered Taxable Person is obligated to do so under the Tax Law	The Registrant shall be obligated to pay a late payment penalty consisting of: (2%) of the unpaid tax is due immediately once the payment of Payable Tax is late; (4%) is due on the seventh day following the deadline for payment, on the amount of tax which is still unpaid. (1%) daily penalty charged on any amount that is still unpaid one calendar month following the deadline for payment with upper ceiling of (300%).
15	A Person not accounting for any tax that may be due on import of goods as required under the Tax Law.	(50%) of unpaid or undeclared tax.

Table (2): Violations and Administrative Penalties related to the Implementation of the Federal Decree-Law No. (7) of 2017 on Excise Tax

	Description of Violation	Administrative Penalty (AED)
1	Failure by the Taxable Person to display prices inclusive of Tax.	(15,000).
2	Failure to comply with the conditions and procedures related to transfer the Excise Goods from a Designated Zone to another Designated Zone, and the mechanism of processing and storing of such Excise Goods.	The penalty shall be the higher of AED (50,000) or (50%) of the tax, if any, chargeable in respect of the goods as the result of the violation.
3	Failure by the Taxable Person to provide the Authority with price lists for the Excise Goods produced, imported or sold thereby.	(5,000) for the first time. (20,000) in case of repetition

Table (3): Violations and Administrative Penalties related to the Implementation of the Federal Decree-Law No. (8) of 2017 on Value Added Tax

	Description of Violation	Administrative Penalty (AED)
	Failure by the Taxable Person to display prices inclusive of Tax.	(15,000)
	Failure by the Taxable Person to notify the Authority of applying Tax based on the margin.	(2500)
	Failure to comply with conditions and procedures related to keeping the Goods in a Designated Zone or moving them to another Designated Zone.	The penalty shall be the higher of AED (50,000) or (50%) of the tax, if any, chargeable in respect of the goods as the result of the violation.
	Failure by the Taxable Person to issue the Tax invoice or an alternative document when making any supply.	(5,000) for each tax invoice or alternative document.
	Failure by the Taxable Person to issue a Tax Credit Note or an alternative document	(5,000) for each tax credit note or alternative document.
	Failure by the Taxable Person to comply with the conditions and procedures regarding the issuance of electronic Tax Invoices and electronic Tax Credit Notes	(5,000) for each incorrect document.

Administrative Penalties shall not be less than 500 Dirhams for any violation and shall not exceed three times the amount of tax in respect of which the administrative penalty was levied.

Does a taxable person have a right to object to Administrative Penalties?

A taxable person has a right to object to Administrative Penalties imposed on him. The taxable person may submit a request to the authority to reconsider any of its decision issued in connection with him in whole or in part provided that the reasons are included within 20 business days from him being notified of the decision.

When can the FTA reduce or waive Administrative Penalties?

The Person has an excuse that is acceptable to the Authority.
The Person provides evidence that justifies the excuse and the violation it caused, which led to the imposition of Administrative Penalties.
The reduction or exemption application shall be notified to the Authority as per the mechanism specified by the Authority within 10 business days as of the end of the acceptable excuse.
The Person shall not have been subject to any Administrative Penalties in the 2 years preceding the application.
The Person shall demonstrate that they have corrected the violation.