UAE VAT Penalty Amendments Explained

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

FAQs on UAE VAT Penalty Amendments Explained

What is qualifying group relief in UAE CT?

It’s a rule that lets group companies transfer assets or liabilities to each other without paying tax if they follow all the FTA’s conditions

Who can be part of a qualifying group?

Only companies (not individuals) that are taxable persons, meet the 75% ownership rule, and aren’t exempt or qualifying free zone persons.

What assets or liabilities can be transferred?

Only those held on the transferor’s capital account. Transfers outside the capital account don’t qualify.

What happens if a company leaves the group or sells the asset?

If a transferor or transferee leaves the group within two years, or if the asset is sold again, the FTA may claw back the tax relief.

How does Mubarak Al Ketbi (MAK) Auditing help with group relief?

MAK Auditing checks your eligibility, sets up your group, helps with elections, and keeps your company on the right track—so you never let the grass grow under your feet.