Value-added tax (VAT) is a consumption tax that is applied to goods and services in the United Arab Emirates (UAE). The standard VAT rate in the UAE is 5%. Businesses that are registered for VAT must charge VAT on their sales, and they can claim back the VAT they have paid on their purchases.
Businesses in the UAE are required to file VAT returns on a regular basis and make payments to the Federal Tax Authority (FTA). Businesses are also required to keep accurate records of their VAT transactions.
Late Payment Penalties for VAT in the UAE
The penalties for late registration for VAT in the UAE are as follows:
- A fine of AED 20,000 for failing to register within 30 days of becoming eligible.
- An additional fine of AED 10,000 for every 30 days of delay, up to a maximum of AED 50,000.
- An additional fine of AED 1,000 per day for any additional delay, up to a maximum of AED 180,000.
The penalties for failure to file VAT returns on time in the UAE are as follows:
- A fine of AED 500 for failure to file the return within the first 30 days of the due date.
- An additional fine of AED 100 per day for any additional delay, up to a maximum of AED 20,000.
The penalties for failure to maintain records in VAT in the UAE are as follows:
- A fine of AED 3,000 for failure to maintain records or provide them to the Federal Tax Authority (FTA) upon request.
- Additional fines of AED 500 for each day of delay in providing the records to the FTA upon request.
It is important to note that these fines are in addition to any VAT that may be due and interest on late payments. Businesses that fail to register for VAT may also be subject to additional penalties, such as fines or even criminal prosecution.
To avoid late payment penalties, businesses should ensure that they file VAT returns and make payments on time. Businesses should also keep accurate records of their VAT transactions and maintain proper documentation to support their VAT returns.
It is also recommended for businesses to maintain a good relationship with the FTA and to communicate with them in case of any issues or concerns. Additionally, businesses should stay informed about any changes in VAT regulations or deadlines to ensure compliance.
In conclusion, businesses in the UAE should be aware of the penalties for late payment of VAT and take steps to avoid them by filing VAT returns and making payments on time and keeping accurate records. It is important for businesses to stay informed about any changes in VAT regulations and to maintain a good relationship with the FTA. At ATC group, our team of VAT consultants have an array of experience working with small, medium and large companies alike and providing consultancy services to help client avoid any VAT penalties. It is best that companies are VAT compliant, have proper Tax Accounting in place to avoid complexities in the future and avoid penalties.
