The Federal Tax Authority (FTA) shared a public clarification on 28th April 2021 about the amendments for provisions under the Cabinet Decision No 40 of 2017 for administrative penalties. VAT penalties include administrative penalties, which mean the monetary fines imposed on a person or an entity by the FTA for breaching the provisions in the Tax Law of UAE. Penalties can easily be avoided by taking the necessary precautions for non-compliance while filing the VAT report. Businesses have more time to review their data and submit an accurate VAT filing and can benefit from up to 70% waiver for their unpaid penalties if they meet the criteria.
1. What are the new VAT
Administrative Penalties?
https://farahatco.com/blog/new-vat-administrative-penalties/
2. Int
The Federal Tax Authority (FTA) shared a public
clarification on 28th April 2021 about the amendments
for provisions under the Cabinet Decision No 40 of
2017 for administrative penalties. VAT penalties
include administrative penalties, which mean the
monetary fines imposed on a person or an entity by the
FTA for breaching the provisions in the Tax Law of
UAE. Penalties can easily be avoided by taking the
necessary precautions for non-compliance while filing
the VAT report. Businesses have more time to review
their data and submit an accurate VAT filing and can
benefit from up to 70% waiver for their unpaid
penalties if they meet the criteria.
3. Changesinthe
submission of
Voluntary
Disclosure
Depending on the time of submission of the Voluntary Disclosure
Penalties range from 5% to 40%.
Previously there was a uniform 5% penalty for the underpaid tax
amount. However, now a yearly penalty is introduced.
Year 1- 5% of the underpaid tax
Year 2- 10% of the underpaid tax
Year 3- 20% of the underpaid tax
Year 4- 30% of the underpaid tax
Year 5 and further – 40% of the underpaid tax.
The sharp increase in penalty percentage over the consecutive years
ensures that it doesn’t get violated, as VAT registered companies need
to verify their historical filings and avoid the same mistakes again.
Some companies find it challenging to locate an error when the VAT
report is submitted and payment has been made. Even though they are
within the deadline, there will be a penalty for underpayment.
It is always beneficial to get a third eye view of your UAE VAT Report
from an accounting services company to avoid any error.
4. LatePayment
Penalty
The Late Payment Penaltyis levied if there is no
voluntary disclosure or a tax assessment. The new
rules provide a window of 20 days to settle any
underpaid amount.
20 working days from the date of submission of
Voluntary disclosure
20 Working days right after the receipt of Tax
Assessment
However, if the taxpayer has underpaid the VAT
returns, then the penalty will apply from the due date
of the original VAT return, in case there is no voluntary
disclosure.
5. ThenewLate
Payment Penalties
areasbelow:
No VAT Penalty from due date today 6. Earlier, an
underpaid VAT return had 2% of the underpaid
amount
From Day 7 until day 30, is also exempt from the VAT
penalty giving the taxpayers ample time to provide
disclosures and justifications.
From day 31 onwards, a 4% tax on the underpaid VAT
is levied unless there is a voluntary disclosure or
receipt of tax assessment, where 20 business days are
granted for voluntary disclosure.
6. What arethe
fixedLate
Payment
Penalties?
The current First Voluntary Disclosure was AED 3000/- made
AED 1000/- under the new rules. Any subsequent voluntary
disclosure has been reduced to AED 3000/- from the initial AED
5000/-
Furthermore, there is an increase in the percentage of penalty
levied when a correction of error is notified to the taxpayer by the
Federal Tax Authority. Initially, there was a penalty of 30% of the
underpaid amount after receiving the notification from the FTA
Audit. It was furthered to 50% if the error was discovered during
the FTA Audit. There is a flat 50% penalty of the underpaid tax
amount and an additional 4% underpaid tax each month from the
date of the VAT returns due.
Taxpayers can benefit up to a 70% waiver of penalties if the
unpaid qualify with the below conditions.
If the penalties were imposed on the taxpayer before 28th June
2021 and are unpaid.
If the total tax amount and 30% of administrative penalties are
paid by 31st December 2021 but not before 28th June 2021.
7. Someother
significant
changesinthe
penalties under
theCabinet
Penalty for showing prices inclusive of VAT is now
reduced from AED 15,000 to AED 5,000/-
Non-issuance of Tax Credit note or Tax Invoice penalty
is reduced from AED 5,000/- to AED 2,500
There is a reduction in the penalty from AED 20,000/-
to AED 10,000 for late registration, whereas
deregistration has been reduced from AED 10,000 to
AED 1,000 per month. It is capped at AED 10,000
8. Summary
The recent changes in the administrative VAT
penalties provide relief for taxpayers. There is a
significant change from penalties being generalized to
a fault- related liabilities. The increase in penalties is
seen chiefly where the historic filing data can be easily
studied, and such penalties can be avoided. Farahat
and Co are one of the UAE’s leading TAX Consultancy.
They have a team of qualified VAT Consultants who
can help your company to prevent any such penalty. To
avoid any late payment penalty or error in reporting,
you can seek assistance from a qualified accountant
from Farahat and Co. Click here to get in touch today!
