VAT Penalties in Dubai, UAE

VAT Penalties in Dubai, UAE - Makebiz

The United Arab Emirates has strict tax laws, non-compliance with which leads to significant fines and penalties. Let’s identify common types of violations and their consequences.  

1. Violation of the deadline for VAT registration occurs when the turnover of the payer has already amounted to more than 375,000 AED. Then new companies will receive a fine of AED 10,000, and the next time already AED 20,000. 

2. The deadline for filing the return is the 28th day after the end of the tax period. For the first instance of non-compliance, a fine of AED 1,000 is issued. If the situation is repeated in the following months of the year — AED 2,000.

3. Violation of VAT payment terms. From the first day of delinquency penalties are charged as 2% of the unpaid amount, from the 8th day — 4%, then for each following month an additional 1% until the tax is paid in full. 

4. Inaccuracy of data or the presence of errors in the declaration. The payer has 20 days to correct the error in the form, otherwise a fine of 10,000 AED primary, 20,000 AED — for a repeated case. 

5. Illegal VAT refund. The amount wrongfully reimbursed must be refunded, including a penalty of 50% of that amount. 

6. Lack of tax documentation. The payer is obliged to keep documents related to tax obligations for five years. If a violation is detected during an audit, a fine of AED 10,000 will be imposed initially and AED 50,000 for a repeat violation.

Separately, it is worth noting the importance of filing not only VAT returns but also corporate tax returns. For the absence of a tax return for each month during the year will have to pay AED 500, and starting from the 13th month, the cost of the penalty will increase to AED 1,000 per month. 

To avoid penalties, it is recommended to 

  • Register for tax purposes on time; 
  • carefully check declarations, correcting errors if necessary; keep and save all documentation;
  • consult with specialists in the field.

In order to minimize risks and respect the reputation of your business, it is important to cooperate with professionals who can promptly advise on all legal and accounting issues, help with timely registration and payment of taxes. Sign up for a free consultation with a Makebiz accountant and learn more about the tax system in the UAE. 

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