Non Compliance And Administrative Penalties For Vat In UAE
The penalties range from as low as Dh3,000 and go up to Dh50,000 depending on the offences committed by the entities or individuals.
The UAE on Monday announced services fees and fines for non-compliance of value-added tax (VAT) laws as the country heads towards implementation of the consumer-focused taxation system from January 2018.
The regulations covers individuals, companies, tax agents and their legal representatives who come under the gambit of this new VAT regulations. The penalties range from as low as Dh3,000 and go up to Dh50,000 depending on the offences committed by the entities or individuals.
As per the new regulations, if the person fails to keep required records and other information specified in the laws will be fined Dh10,000 in the first instance and Dh50,000 in case of repetition.
The law further states that if the person fails to submit data, records and documents related to tax in Arabic to authority when requested, he would be penalised Dh20,000.
The UAE will implement 5 per cent VAT – which is one of the lowest in the world – from next year on a host of goods and services as part of the GCC-wide agreement. As per the UAE regulations, companies that provide goods and services with annual turnover of Dh375,000 or higher will be subject to VAT. While businesses with taxable supplies below Dh375,000 and above Dh187,500 will have the option to register. The UAE aims to raise Dh12 billion through VAT collections in the first year and Dh20 billion in the second year. Analysts and economist believe that the VAT will increase inflationary pressure in the country.
As part of the GCC deal, Saudi Arabia will also join the UAE from January 2018 while other Gulf nations will jump into the bandwagon at a later stage.
A press statement issued on Monday said the UAE Council of Ministers adopted Cabinet Decision No. 39 of 2017 on fees for services provided by the Federal Tax Authority and Cabinet Resolution No. 40 of 2017 on penalties for violations of tax laws in the UAE.
“These decisions bring an added layer of transparency to the Authority’s relationship with its customers,” said Sheikh Hamdan bin Rashid Al Maktoum, Deputy Ruler of Dubai and UAE Minister of Finance. “This, in turn, provides extra incentive for stakeholders and all concerned parties to abide by tax regulations.”
“All customers can refer to the official Directory of Services Fees to know what is required of them to be in compliance with tax procedures,” Sheikh Hamdan bin Rashid explained.
Thomas Vanhee, founding partner, Aurifer Middle East Tax, said: “After having opened the possibility to VAT register in the UAE and after the introduction of excise taxes on October 1, 2017, the UAE government has now decided on the applicable fees and penalties for non-compliance with the VAT and excise tax legislation. This complements the Federal Tax Procedures Law and its Executive Regulations. These laws already give much power to the UAE’s Federal Tax Authority. The considerably high penalties applicable will now additionally give the FTA an important instrument to deter taxpayers from non-compliance.”
Vanhee elaborated that the penalty framework is very strict.
“This can be explained by the fact that the same penalties apply to excise tax and VAT. In mature jurisdictions penalties on excise goods, such as tobacco, are also high, since they are very fraud sensitive goods. Penalties for VAT offences though are usually lower and provide for a framework in which voluntary disclosures are encouraged by automatically waiving penalties for tax payers coming forward,” Vanhee added.
The fine for not registering is Dh20,000, which is double the fine applicable in Saudi Arabia, he said, adding that if the tax payer does not pay his taxes due, after one month a daily penalty applies of one per cent. In the oldest jurisdictions in the EU which have implemented VAT and have a relatively limited VAT gap, the late payment penalties usually vary between 0.4 and one per cent per month – with exceptions up to 2.75 per cent. In case of an error in the voluntary disclosure by the person/taxpayer, it will result in Dh3,000 fine for the first time and Dh5,000 in case of repetition.
But in case of failure of the taxable person to voluntary disclose errors in the taxable returns will also incur a fine of Dh3,000 for the first and Dh5,000 for repetition.
According to Federal Tax Authority, tax registration service and issuance of e-tax registration certificate will be free of charge but an attestation will incur a fee of Dh500. However, tax agents will have to pay Dh3,000 fee for registration and renewal for three years.
According to FTA, registration and renewal fee for an accounting software provider will be Dh10,000 for one year, whereas registering a Designated Zone will cost Dh2,000 per year.
However, there will be no service fee for registering a warehouse keeper or issuing an electronic warehouse keeper registration certificate. But an official printed certificate will cost Dh500.
Via: Khaleej Times