The UAE has reduced old penalties on value-added tax (VAT) and excise tax in order to help companies and individuals better cope with the impact of the Covid-19 pandemic. Tax payers who currently have penalties pending can see those reduced to 30 per cent, provided they settle them before December 31, 2021. Going forward, late payment penalties will be reduced to four per cent per month, a substantial reduction from one per cent per day while an overall cap stays at 300 per cent. Current Calculation 2 % for the first day of non submission 4 % for the 7th day of non submission and daily 1% from non submission for 30 days onward.
- LATE PENALTY DATES HAVE BEEN REVISED
- PENALTIES REDUCED FROM 1% PER DAY TO 4% PER MONTH
- LATE PENALTY STILL CAPPED AT MAXIMUM 300%
- CHANCES OF REDUCTION OF PREVIOUS UNPAID PENALTIES
| OLD RULE ON PENALTY | NEW ON PENALTY (PRESENT) |
| 2% of the unpaid tax immediately past the due date 4% is due on the seventh day following the due date | 2% of the unpaid tax immediately past the due date |
| 1% per day after a calendar month from the due date. | 4% per month thereafter commencing a month after the due date |
Discounts for previous penalties:
The new Decision grants the Federal Tax Authority to decrease your penalty provided the following conditions are met:
- 1. Regularly pay your taxes till December 2021
- 2. Pay 30% of your previous outstanding balance for penalty charged as per previous cabinet decision
- 3. Lead to decrease in tax penalty by 30%
the full list of penalties that are revised based on Cabinet Resolution No. (49) of 2021 Amending Some Provisions of Cabinet Resolution No. (40) of 2017 On Administrative Penalties Imposed for Violating the State’s Tax Laws
Article (1)
Replacement of Tables
The below tables shall replace the tables on the administrative violations and penalties attached to Cabinet Resolution No. (40) of 2017 on Administrative Penalties imposed on violations to the tax laws of the UAE:
Table No. (1) | ||
| No. | Violation Description | Administrative Penalty (AED) |
| 1. | The person doing business failed to keep the required records and other information specified in the Tax Procedure Law and the tax law. *Reduced | (10,000) for the first time.(20,000) in case of repetition. |
| 2. | The person doing business failed to submit data, records and documents related to tax in Arabic to FTA upon request. *Not amended | (20,000) |
| 3. | The taxable person failed to submit the registration application within the time limit specified in the tax law. *Reduced | (10,000) |
| 4. | The Registrant failed to submit a request to cancel the registration within the time limit specified in the tax law. *New Mechanism | (1,000) upon delay in submitting the application and on the same date per month, with a maximum of (10,000) |
| 5. | The Registrant failed to inform FTA of any situation that may require amending the information related to its tax record kept with FTA. *Reduced | (5,000) for the first time. (10,000) in case of repetition. |
| 6. | The legal representative of the taxable person failed to report its appointment as a legal representative of the taxable person within the specified dates, provided that the penalties in this case shall be from the legal representative’s own money. *Reduced | (10,000) |
| 7. | The legal representative of the taxable person failed to submit the tax return within the specified dates, within the specified dates, provided that the penalties in this case shall be from the legal representative’s own money. *Not Amended | (1,000) for the first time.(2,000) in case of repetition within (24) months. |
| 8. | The Registrant failed to submit the tax return within the time limit specified in the tax law. * Not amended | (1,000) for the first time.(2,000) in case of repetition within (24) months. |
| 9. | The taxable person failed to pay the tax shown as a tax payable in the tax return or voluntary declaration that was submitted, or the tax assessment that was notified within the time limit specified in the tax law. *New Mechanism | 1. The taxable person shall pay the penalty applicable to the late payment of the payable tax, with a maximum of (300%), in accordance with the following:a) (2%) of the unpaid tax due on the day following the due date for payment, upon late payment of the payable tax. b) (4%) monthly penalty due after one month from the payment due date, and on the same date every month after that, on the amount of tax that has not been paid to date. 2. For the purposes of this penalty, the due date for payment in the event of voluntary declaration and tax assessment is as follows: a) In the case of the voluntary declaration, (20) business days from the date of its submission. b) In the case of tax assessment, (20) business days from the date of its receipt. |
| 10. | The Registrant submitted an incorrect tax return. *New Mechanism | 1. A fixed penalty is imposed:(1,000) for the first time. (2,000) in case of repetition. Clause (1) of this penalty, if the incorrect tax return results in a tax difference less than the fixed fine mentioned in Clause (1) of this penalty, a fine equal to the tax difference shall be imposed, provided it is not less than AED (500). 3. Whoever corrects its tax return before the payment due date shall be exempted from the penalty specified in Clauses (1) and (2) of this penalty. |
| 11. | The person / taxpayer makes a voluntary declaration of errors in the tax return, tax assessment or tax refund application, in accordance with Clauses (1) and (2) of Article (10) of the Tax Procedures Law. *New Mechanism | Without prejudice to the consequences of the penalty mentioned in Clause (10) hereof, a proportional penalty shall be imposed on the amount of the difference between the tax calculated and the tax that should have been calculated, in accordance with the following:1. (5%) on the difference amount in the event that the voluntary declaration was submitted within one year of the due date of the tax return, tax assessment, or related refund application. 2. (10%) on the difference amount in the event that the voluntary declaration was submitted during the second year from the due date of the tax return, tax assessment, or related refund application. 3. (20%) on the difference amount in the event that the voluntary declaration was submitted during the third year from the due date of the tax return, tax assessment, or related refund application. 4. (30%) on the difference amount in the event that the voluntary declaration was submitted during the fourth year from the due date of the tax return, tax assessment, or related refund application. 5. (40%) on the difference amount in the event that the voluntary declaration was submitted after the fourth year from the due date of the tax return, tax assessment, or related refund application. |
| 12. | The person / taxpayer fails to make a voluntary declaration of an error in the tax return, tax assessment or tax refund application, in accordance with Clauses (1) and (2) of Article (10) of the Tax Procedures Law, before being notified of FTA’s tax audit. *New Mechanism | Without prejudice to the consequences of the penalty mentioned in Clause (10) hereof, shall be imposed a person:1. A penalty of (50%)on the amount of error; 2. A penalty of (4%) for each month or part of the month from any of the following: a) Tax unpaid to FTA, from the date that payment is due for the relevant tax period until the date of receipt of the tax assessment. b) The tax that has not been refunded to FTA due to an unjust tax refund, from the date of the tax refund from FTA until the date of receiving the tax assessment. |
| 13. | The person doing business failed to provide facilities to the tax auditor in violation to the provisions of Article (21) of the Tax Procedure Law. Not amended | (20,000) |
| 14. | The Registrant failed to calculate tax on behalf of another person when the registered taxable person is obligated to do so in accordance with the tax law. * New Mechanism | 1) The Registrant shall pay the penalty applicable to the late payment of the payable tax, with a maximum of (300%), in accordance with the following:a) (2%) of the unpaid tax due on the day following the due date for payment, upon late payment of the payable tax. b) (4%) monthly penalty due after one month from the payment due date, and on the same date every month after that, on the amount of tax that has not been paid to date. 2) For the purposes of this penalty, the due date for payment in the event of voluntary declaration and tax assessment is as follows: a) In the case of the voluntary declaration, (20) business days from the date of its submission. b) In the case of tax assessment, (20) business days from the date of its receipt. |
| 15. | The taxable person failed to calculate any tax that may be due on importing goods in accordance with the tax law. * Not Amended | (50%) of unpaid or undeclared tax. |
Table No. (2) | ||
| No. | Violation Description | Administrative Penalty (AED) |
| 1. | The taxable person failed to present the prices as inclusive of the tax. | (5,000) |
| 2. | Failure to comply with the conditions and procedures for transporting the excise goods from one designated zone to another, and the mechanism of preserving, storing and processing them in it. | The penalty shall be the higher of (50,000) or (50%) of the tax, if any, imposed on the goods related to the violation. |
| 3. | The taxable person failed to provide FTA with price lists of excise goods it has produced or imported. | (5,000) for the first time(10,000) for each repetition |
Table No. (3) | ||
| No. | Violation Description | Administrative Penalty (AED) |
| 1. | The taxable person failed to present the prices as inclusive of the tax. *Reduced | (5,000) |
| 2. | The taxable person failed to report to FTA about its application of the tax on the margin basis. *Not amended | (2,500) |
| 3. | Failure to comply with the necessary conditions and procedures for storing goods in a designated zone or moving them to another designated zone. *Not amended | The penalty shall be the higher of (50,000) or (50%) of the tax, if any, imposed on the goods related to the violation. |
| 4. | The taxable person failed to issue the tax invoice or alternative document when making any supply. *Reduced | (2,500) for each case discovered. |
| 5. | The taxable person failed to issue the tax credit note or alternative document. *Reduced | (2,500) for each case discovered. |
| 6. | The taxable person failed to comply with the conditions and procedures related to issuing the tax invoice and tax credit note electronically. *Reduced | (2,500) for each case discovered. |
4 thoughts on “UAE tax penalties reduced and discounts granted”
Very Valuable In formations. Thank you FTA for such a nice decision. It really help lot of companies. Also thank you fincity to help us to file proper taxation to avoid any penalties.
Thank you abdulla , Our fincity team in UAE always trying to help companies in their VAT, accounting and IT needs.
Hello sir my company got a penalty of AED 67000 and we did only one submission from 2018 how can you help to complete the tax filing, we received call from fta to clear the filing as early as possible , can Fincity help us to finalize the filing and remove the penalties?
Hello Mr Anwer, thanks for your inquiry, Definitely fincity can help you in this matter, Please share your contact number or please contact us in 0588572149 to fix a meeting in our office or our team will come to your office to discuss. Please note that need to finish all pending submission before 28th June to get benefit from FTA fine discount.
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