Consequences of Late Filing or Non-Filing of VAT returns in UAE
Taxable persons in the UAE are required to file a VAT return to the Federal Tax Authority (FTA) at the end of each tax period within the timeframe specified in the UAE VAT Law. As per Executive Regulations of Federal Decree-Law No (8) of 2017 on VAT, the standard Tax Period shall be three calendar months ending on the date that the FTA determines. Businesses should be aware of their applicable VAT return filing date as non-filing or late-filing results in hefty administrative penalties.
Consulting with FTA-approved tax agents in Dubai is crucial to avoid the losses resulting from fines as nearly all violations carry a fine no less than AED 1,000. The agents from the best VAT consultancy firms in Dubai will help the businesses avoid fines incurring from non-filing / late-filing of VAT returns, and filing incorrect returns. This blog is an earnest attempt at educating the businesses about the consequences of non-filing or late filing of VAT returns in the UAE.
Read on to get a glimpse of the various VAT return-related violations and respective administrative penalties set out by the government through Cabinet Resolution No. (40) of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE:
1. Penalties If Legal Representatives Fails to File Return
A legal representative appointed by the taxable person is liable to file VAT return in the UAE on behalf of the client. In case, the representative fails to file the returns in the timeframe stipulated by the FTA, a penalty of AED 1,000 will be levied. A repetition of the same violation within 24 months will lead to a heavier penalty of AED 2,000. Interestingly, the FTA will charge the penalty from the legal representative’s own funds. This underscores the importance of choosing the best tax agents in Dubai, UAE, to file the returns on time.
2. Penalties if Tax Registrants Fail to File a VAT Return
A registrant who fails to submit the VAT Return within the timeframe specified in the Tax Law is bound to pay a penalty of AED 1,000in the first instance. The FTA will slap a fine of AED 2,000 if the offence is repeated within 24 months. Tax registrants need to take extra care to remember the dates of filing their mandatory UAE VAT returns. A safe way to ensure this is hiring the best VAT consultancy firms in Dubai who will provide timely reminders to the taxable persons.
3. Failure to Settle Payable Tax Mentioned in Tax Return
If a taxable person fails to settle the payable tax stated in the submitted VAT Return or VAT assessment within the specified timeframe, the FTA will consider it as punishable by penalties. The fines for such violations are,
- Two per cent of the unpaid tax is due immediately once the late payment is made
- Four per cent is due on the seventh day after the deadline for payment
- One per cent daily penalty due on any amount left unpaid one calendar month following the deadline for payment with an upper ceiling of (300%)
4. Penalties for Submitting Erroneous VAT Return
Taxable persons should seek the assistance of registered VAT consultancy firms in Dubai to avoid errors, or false information in the VAT returns they file with the FTA. Filing faulty VAT returns in the UAE incur two types of penalties. In the first type, the taxable persons have to pay a fixed penalty of AED 3,000 for the first time & AED 5,000 for repetition.
In the second type, a percentage-based penalty applies on the amount unpaid to the FTA due to the error and resulting in a tax benefit as follows:
- Fifty per cent if the VAT Registrant does not make a voluntary disclosure or he made the voluntary disclosure after being notified of the tax audit, and the Authority has started the tax audit process, or after being asked for information relating to the tax audit, whichever takes place first.
- Thirty per cent if the tax Registrant makes a voluntary disclosure after getting notified of the tax audit and before the Authority starts the tax audit.
- Five per cent if the tax registrant makes a voluntary disclosure before being notified of FTA tax audit
How can UAE VAT Consultancy Firms Help to Avoid VAT Penalties?
Taxable entities are recommended to file tax returns through FTA-approved tax agents in Dubai, which may help them avoid penalties arising from various forms of non-compliance. Non-filing or late filing of VAT returns are the most common forms of violation that result in VAT administrative penalties in the UAE. However, submission of incorrect tax returns and failure to settle payable tax stated in VAT returns are also liable for VAT penalties in the UAE.
Since each of these violations carries a significant amount as penalties, businesses are advised to consult with the best VAT consultancy firms in Dubai, UAE such as Jitendra Chartered Accountants (JCA). JCA’s highly qualified tax agents in Dubai are approved by the FTA, and therefore, the businesses can ensure that their VAT returns are filed in compliance with the tax laws and procedures. Penalties don’t augur well for the credibility of businesses, and that is where JCA’s assistance improve the prospects of taxable entities in the UAE.