Introduction
Every business must follow UAE VAT law to avoid penalties. UAE VAT rules include clear steps about fines for mistakes or late actions. In April 2021, the FTA made new changes about penalties. The new rules help businesses fix errors early and pay less in penalties. If you own a company in UAE, you must know these changes. Mubarak Al Ketbi (MAK) Auditing always guides clients about new VAT laws.
Major Amendments to VAT Penalties
The FTA (Federal Tax Authority) made many updates to the penalty system. These updates focus on making things easier for compliant companies. The FTA also gives a chance for businesses to correct errors through voluntary disclosure.
Key penalty changes:
- Fixed penalty for first voluntary disclosure:
Reduced from AED 3,000 to AED 1,000. - Fixed penalty for any next voluntary disclosure (same return):
Reduced from AED 5,000 to AED 2,000. - Variable penalty for voluntary disclosures:
Now based on time taken:- 5% if made in the next year after mistake.
- 10% in the second year.
- 20% in the third year.
- 30% in the fourth year.
- 40% in fifth year or later.
- Penalties after FTA notification or audit:
Now there’s a fixed penalty—50% of unpaid VAT—plus 4% of unpaid VAT per month, starting from the VAT due date.
Penalties for Late VAT Payments
The law now gives a 20-day grace period for late VAT payments after a voluntary disclosure or tax assessment. If you pay within 20 days, you avoid the penalty. If you pay after 20 days, a penalty of 4% per month applies.
Earlier, penalties started from the original due date. Now, this new rule makes it easier for businesses to settle on time.
Other Reductions in VAT Penalties
The FTA reduced many other penalties to support companies:
- Late VAT registration:
Now AED 10,000 (before AED 20,000). - Delay in VAT deregistration:
AED 1,000 per month, up to AED 10,000 (before AED 10,000 flat). - Not displaying prices with VAT included:
Now AED 5,000 (before AED 15,000). - Not issuing a tax invoice or credit note:
Now AED 2,500 (before AED 5,000).
Mubarak Al Ketbi (MAK) Auditing reminds businesses to always update their compliance to avoid these charges.
Implications of VAT Penalty Amendments for UAE Businesses
These new amendments give real relief to VAT registrants in UAE. Companies can avoid heavy penalties by acting early. If your team finds mistakes, it’s better to disclose fast. But, if a business waits too long, penalties increase as years pass.
Main takeaways:
- Use voluntary disclosure if you find an error.
- Fix issues as soon as possible.
- Don’t miss grace periods for payments.
But remember, penalties may double if errors stay hidden. Companies should keep strong VAT records and review their tax filings regularly. It’s wise to get a VAT checkup from experts like Mubarak Al Ketbi (MAK) Auditing.
What Mubarak Al Ketbi (MAK) Auditing Can Do for You
Mubarak Al Ketbi (MAK) Auditing offers complete VAT help for businesses in UAE. Our team knows every change in the law. We help you:
- Review your VAT returns for errors
- Make voluntary disclosures before penalties rise
- File on time and use all grace periods
- Check your VAT records for compliance
- Reduce your risk of fines
We always say: Don’t let the grass grow under your feet—fix VAT issues fast with expert help!
- For more information, visit our office:
Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates - Or contact/WhatsApp: +971 50 276 2132
