للاطلاع على النسخة العربية من الفيديو اضغط هنا
“Oh yes, sure. I’m happy to pay a fine.” – said no one ever.
Not only is the word “fine” associated with a negative connotation (that you did something wrong), it also leaves you short changed.
However, many people get fined for not dealing with VAT properly because they don’t know better.
Knowledge is power.
That’s why in this article we are talking about top 10 VAT penalties businesses should watch out for and how you can avoid them.
Table of Content
- Not maintaining records
- Not submitting documents in Arabic
- Failing to submit a registration application within timeline
- Not submitting a deregistration application within the time frame
- Did your business make a recent tax-sensitive change?
- You hire a new legal representative and they fail to inform the FTA
- Not submitting a tax return within the timeframe
- Not paying your taxes on time
- Your business submits an incorrect tax return
- You voluntarily disclose your VAT return error to the FTA
1. Not maintaining records compliant with FTA protocols
In my experience, most businesses get fined when they fail to maintain the relevant records according to the protocols of the Federal Tax Procedures Law.
If you’re found to be non-compliant for the first time, you’ll be fined AED 10,000. Second instance onwards it’s a whopping AED 50,000 fine.
That’s bound to hurt the bottom line of your business!
2. Not submitting data, records, and documents in Arabic, according to FTA rules
You should already have this information on file.
If you fail to submit the required data, you’ll be fined AED 20,000.
Disheartening isn’t it?
3. Failing to submit a registration application within the FTA-specified timeline
You’re required to submit a registration application within 30 days of reaching the registration threshold.
I understand – getting all records together and making sure they are compliant is a tough job.
Unfortunately, if you fail to do so, your business will be slapped with a AED 20,000 fine.
4. Not submitting a deregistration application within the FTA-specified time frame
According to VAT law, you’re supposed to deregister your business when you shut shop.
You also need to deregister if your taxable supplies fall below or are projected to fall below the AED 187,500 threshold.
Failure to comply in either case will lead to a fine of AED 10,000
5. Did your business make a recent tax-sensitive change?
If your business recently made a change that’s going to affect the VAT implications of your business, you need to inform the FTA as soon as possible.
Non-compliance for the first time will lead to a fine of AED 5,000 and AED 15,000 for subsequent violations.
6. You hire a new legal representative and they fail to inform the FTA
Hiring a competent legal representative to protect your business is always a smart move.
But did you know that your new legal representative is required to inform the FTA when they start working with you?
If they fail to do so, they will have to pay a fine of AED 20,000 out of pocket.
7. Not submitting a tax return within the timeframe specified by the FTA
Deadlines are to be taken seriously, especially when it comes to filing your tax returns.
Most of the time, this is within 28 days of the end of the tax period.
If your business fails to file the return, you’ll pay a fine of AED 1,000 and again AED 2,000 if it happens within the next 24 months.
8. Your business does not pay the VAT owed to the FTA within 28 days of the end of the tax period
Once you file your returns, the tax system displays the VAT balance due on their online portal.
The fine if you don’t pay on time? 2% of the unpaid tax is due immediately and the 4% of the unpaid tax is due on the 7th day of delay.
And if you still haven’t paid after that? The FTA charges 1% per day on that unpaid balance within one calendar month following the payment deadline with an upper ceiling of 300%!
9. Your business submits an incorrect tax return
If your business submits an incorrect return, you will face a penalty of AED 3,000 and AED 5,000 if it happens again.
Your business can also be subject to a percentage-based penalty, which is worse!
Honestly, this is sure to make anyone feel like they need to get it right the first time.
10. You voluntarily disclose your VAT return error to the FTA
You realize that your business has made errors on your VAT returns and you reach out to the FTA voluntarily to inform them, hoping to avoid a penalty.
Unfortunately, it doesn’t happen that way.
You will still need to pay a penalty of AED 3,000 the first time and AED 5,000 for subsequent mistakes. You can also be asked to pay a percentage-based fine!
As you can see, these fines can hurt your business. And, they can add up if any information or error slips through the cracks.
Get it right the first time by working with a registered tax professional to handle all your VAT needs.