Tips for UAE Businesses to Avoid Hefty VAT Penalties
Ensuring VAT compliance in the UAE as per relevant tax laws and regulations is essential for the smooth functioning of your business. The Federal Tax Authority (FTA) will impose hefty penalties on your business if any act of non-compliance is detected. Attracting hefty VAT penalties in the UAE will break the back of your business apart from denting your reputation. Tax agents in the UAE can help you to avoid VAT penalties by guiding you on the tax regulations and procedures. Read the following article for some key tips to avoid UAE VAT penalties:
Carry Out VAT Registration On Time
As per the UAE VAT Law, businesses making taxable supplies in the UAE must register for VAT if the value of their taxable supplies and imports exceeds the mandatory registration threshold of AED 375,000. Businesses that meet the criteria of VAT registration in the UAE will incur a penalty of AED 10,000 if they fail to comply with this requirement. Tax agents in Dubai advise eligible businesses to register for VAT without delay to avoid relevant penalties.
Keep Accurate Records as Per the Uae Vat Law
You need to keep the required records and other information as per the UAE Tax Procedures Law and the Tax Law to avoid hefty penalties. If non-compliance is detected, the FTA will impose a fine of AED 10,000 for the first time and AED 20,000 in case of repetition. Apart from avoiding VAT fines in the UAE, keeping accurate records will come in handy for you during tax audits, filing VAT returns and during the external audit process as well. Keeping the records and information will be required to claim input tax without any delay.
Properly Issue Tax Invoices
Taxable persons are required to issue a tax invoice or an alternative document while making a taxable supply. Failure to do so will attract a penalty of AED 2,500 for each missing tax Invoice or alternative document. You can use robust invoicing software to ensure invoices are issued on time without any delay. VAT consultants in Dubai can advise you further on this matter.
Apply for VAT Deregistration On Time
Businesses failing to apply for VAT deregistration within the mandatory deadline will incur a penalty of AED 1,000 per month up to a maximum of AED 10,000. As per the UAE Tax Procedures Law, a tax registrant must apply for VAT deregistration within 20 business days of the occurrence of any of the following reasons:
- The taxable person stops making Taxable Supplies
- The value of the Taxable Supplies made over a period of 12 consecutive months is less than the Voluntary Registration Threshold and said Registrant does not meet the condition stipulated in the UAE VAT Law
File VAT Returns Within the Timeframe Prescribed
As per the Executive Regulations of the UAE VAT Law, the FTA must receive the tax return no later than the 28th day following the end of the Tax Period concerned or by such other date as directed by the Authority. Failing to file the VAT returns within this deadline will make you liable for a penalty of AED 1,000 for the first time and AED 2,000 if repeated within 24 months. Tax agents in the UAE can save you from this penalty by helping you to properly file the VAT returns.
Ensure Your Tax Returns are Accurate
Filing incorrect tax returns in the UAE is liable for a fixed penalty of AED 1,000 for the first time and AED 2,000 in case of repetition. Apart from that, the following penalty will apply:
- As an exception to Clause 1 of this penalty, if the incorrect Tax Return results in a Tax difference less than the fixed penalty (AED 1,000), a penalty equal to that Tax difference of at least 500 shall be imposed.
- Anyone correcting their Tax Return before the due date of payment shall be excluded from the penalty imposed under Clauses 1 and 2 of this penalty.
Train Your Staff Regarding VAT Compliance
Ensure that your staff members are aware of the applicability of VAT on various goods and services as well as the corresponding VAT rates. The employees must have proper knowledge about zero-rated supplies, exempted supplies, and standard-rated supplies. VAT consultants in Dubai can provide VAT training for your staff on all the important aspects and procedures.
Stay Updated on Tax Regulations
The tax registrant must have a good knowledge of the UAE VAT Law and the Tax Procedures Law. Moreover, the business owners and the concerned employees must be updated about the various VAT guides, bulletins, and public clarifications being issued by the FTA periodically. Keeping track of such things will help you to ensure you have not missed any important update or amendment related to the UAE tax procedures. Tax agents in the UAE can help you stay updated on important regulatory updates.
Seek the Help of the Best Tax Agents in Dubai, UAE
Leveraging some of the useful tips detailed in this blog will give you the power to dodge hefty VAT penalties in the UAE. However, hiring tax agents in Dubai is a far more effective and robust way to save your company from administrative penalties. Tax agents in the UAE such as Jitendra Chartered Accountants (JCA) can also come to your rescue if you incur any penalties. Being one of the top FTA-approved tax agents, we can help you with VAT reconsideration requests and other actions in case of VAT penalties. Avail of our VAT consultancy services to ensure effective VAT compliance in the UAE.