In accordance with the UAE VAT Law, it has become a necessity for every registered company in the country to pay the respective tax returns on a quarterly basis by the 28 of the next month. This opened up a whole new area of tax management for which the company management should keep in mind.
The Value Added Tax (VAT) is a fairly new addition to the taxes which are levied in the United Arab Emirates and is deemed compulsory for companies. This tax will help the economy of the country and will also help the companies to develop strong confidence among the investors of the country.
This is why filling in the VAT is very important, and to ensure that all the registered companies file for VAT the United Arab Emirates has decided upon certain penalties and fines which will be levied upon these businesses in the event such companies are unable to pay the said VAT on time.
Penalties and Fines in the UAE
There are different conditions due to which a business is unable to file for VAT in the UAE. The penalties or fines are decided according to each situation by the Concerned authorities of the country. These situations and the penalties levied on the businesses are mentioned below:
- The penalty on late filing of the VAT or its returns
A business is eligible for penalties or fines according to the UAE Tax Laws only if the yearly turnover of the business is more than Dh 150 million. The businesses should also be registered on the online portal of the Federal Tax Authority (FTA). Different percentage of penalties which are charged to a business which is decided according to different timelines as mentioned below-
- In case the tax is not paid within seven days of the mentioned deadline, 2% of the tax is charged as a penalty to the business.
- In case the tax is not paid even after seven days of the mentioned deadline, 4% of the tax is charged as a penalty to the business.
- In case the tax is not paid even after a month of the mentioned deadline, a daily charge of 1% is to be levied on the business.
- The penalty levied on the business for not presenting the proper Accounting Records.
There are many records that are expected of a business to maintain for the smooth and proper functioning of the business. These records also help the management to file for VAT in the UAE. If such records are not present or are improper, the authority may levy a penalty of Dh 10,000 on the business for the first time. If the business repeats the offence later on, then this fine may rise to Dh 50,000.
- A penalty imposed on business for non-disclosure on the Imports
Many businesses need to import their raw materials or other important goods to continue their production. If a business fails to pay taxes on such imported goods, then the business needs to pay a charge of 50% on the total amount, which is unpaid.
- A penalty imposed on incorrect Pricing
If a company is found to either give incorrect prices for their goods or quotes misleading prices of the goods, the business will be levied a penalty of Dh 15,000 by the authorities.
- A penalty imposed for the submission of Incorrect or incomplete Tax Returns
It is up to the management of the company to submit the tax returns, and many a time, the concerned authority checks only some of the companies on a random basis to check if the returns filed by the company are correct. In case a company is found to submit incorrect tax returns or the tax returns are submitted with any error, the company will be charged Dh 3000 for the first offence. If the offence is repeated, the business will be charged Dh 5000 for each repeat offence.
It is in the best interest of a business to keep a record of the taxes paid and analyse the taxes which have to be paid. This way, the management will be able to conduct the proper use of its resources which will, in turn, make the busies more profitable.
If you are looking for a financial firm In the UAE which will help your business to keep track of all the VAT and tax services of your business, then feel free to consult the expert advisors at JAXA Chartered Accountants.
JAXA is a very reputed name in the United Arab Emirates and provides the best possible services at competitive prices. They also provide various financial services such as Accounting Services, Auditing Services, Bookkeeping Services and many other services which will enhance the productivity and profitability of your business. To know more about the various services, Contact Us. We will be happy to assist you.