Consequences of Non-compliance of UAE VAT Laws
With the opinion that concern the increase in prices and cost of living with the new Value Added Tax of 2018. Changes in the reporting practices are also a serious concern for businesses in UAE. This article will tell you the Consequences of Non-compliance with UAE VAT Laws.
The news says that those who do not follow the registration and reporting practices will be liable to substantial penalties. As per mandated by FTA. For those required by law, the penalty for failure to submit a registration application will be DH 20,000. The penalty for failure to submit tax-info data, records, or documents, will also be AED 20,000.
The Fees and Fines
Adopted Oct. 2 by the Council of Ministers and announced by the Federal Tax Authority—are detailed and comparatively high. Said Jeremy Cape, tax and public policy partner at Squire Patton Boggs in London. Among them, a fine of 10,000 dirhams ($2,722) for a first offense in failing to keep the required records and other information specified in Tax Procedures Law and the Tax Law and 50,000 dirhams for subsequent offenses.
Late penalties have got a rise of 4% after seven days instead of 2% of unpaid tax on the due date. In addition, a charge of additional 1% per day will be payable after seven days. This is up to a limit of 300% on tax still unpaid one month after the deadline.
That’s “harsher than the U.K. and, I suspect, most jurisdictions,” said Cape. The maximum default penalty in the U.K. within the first 12 months is 15 percent or 30 pounds ($40), whichever is greater. He said, with an exceptional 100 percent maximum fine for tax overclaim “if you send a return that contains a careless or deliberate inaccuracy,” he said.
Other Penalties against UAE VAT Laws
Lawyer’s which are rejecting their tax affairs will have to pay an additional penalty payable “from the Legal Representative’s own funds”. If one fails to inform the authority of their appointment within the specified time period have to pay fine of 20,000 dirhams. While they will be payable 1,000 dirhams for the first offense of failing to file a client’s tax return. Also, 2,000 dirhams if the offense repeats within 24 months.
The new fees and penalties came into effect from the day after the UAE’s so-called “sin tax” started. With excise duties raising the price of fizzy drinks by 50 percent. Shopkeepers who do not display prices including tax will have to pay 15,000 dirhams ($4,083), the Tax Authority said.
Online tax registration and an electronic tax registration certificate are free of charge. Fees range from 500 dirhams for the issue of an attested paper tax registration certificate to 10,000 dirhams for the annual registration of a software provider with the Federal Tax Authority.
Significant Cumulative Effect
Shiraz Khan, the senior tax adviser at Al Tamimi & Company, said that the penalties have been set high. “It should have the effect of impending noncompliance”. However, he added that in the case of voluntary disclosure of incorrect tax returns or errors in tax returns at an early stage, “the penalties are significantly reduced to encourage businesses to proactively rectify mistakes.”
The tax authority said that those fined would have the right to appeal. But Cape said there is likely to be a limited number of successful appeals and that the detailed schedule of penalties doesn’t leave the room “for a huge amount of discretion.”
“My sense is that the Federal Tax Authority is going to be so overwork. Especially in those first few months that they are going to apply these pretty automatically,” he said. “I don’t think they will have the resources or ability to deal with individual cases.”
If you want to know more about VAT or use our excellent taxation or accounting services, contact us at +1-646-513-4304.