VAT Penalties in UAE MAK Auditing Guide

Introduction to VAT Penalties in UAE

VAT penalties in UAE are important for every business to understand. Value Added Tax (VAT) was introduced in the United Arab Emirates on 1st January 2018 at a standard rate of 5%. This indirect tax applies to goods and services, and compliance is strictly monitored by the Federal Tax Authority (FTA).

VAT registration is mandatory for businesses whose taxable supplies and imports exceed AED 375,000 per year. Businesses can voluntarily register if their taxable supplies or imports exceed AED 187,500 per year. Once registered, companies must file VAT returns within the tax period. If they fail to comply, penalties will be imposed.

Mubarak Al Ketbi (MAK) Auditing helps businesses handle VAT registration, VAT return filing, and penalty management in Dubai and across the UAE.

Common VAT Penalties in UAE

Businesses face several fines if they fail to comply with VAT rules. Below are the main penalties under UAE VAT law:

• Failure to maintain proper financial records such as tax invoices and accounts:
  • AED 10,000 (first time)
  • AED 50,000 (repeat violation)
• Failure to submit records in Arabic when requested by FTA: AED 20,000
• Late VAT registration: AED 20,000
• Late VAT de-registration: AED 10,000
• Failure to update FTA about tax record changes:
  • AED 5,000 (first time)
  • AED 15,000 (repeat case)
• Late VAT return filing:
  • AED 1,000 (first time)
  • AED 2,000 (repeat within 24 months)
• Incorrect VAT return filing:
  • AED 3,000 (first time)
  • AED 5,000 (repeat)
• Errors in VAT disclosure:
  • AED 3,000 (first time)
  • AED 5,000 (repeat)
• Failure to disclose VAT errors voluntarily:
  • AED 3,000 (first time)
  • AED 5,000 (repeat)
  • 50% of unpaid VAT amount
• Failure to cooperate with FTA auditors: AED 20,000
• Issuing incorrect tax invoices:
  • AED 5,000 (first case)
  • AED 10,000 (repeat case)
• Failure to account and record VAT due: 50% of unpaid VAT
• Failure to display prices inclusive of VAT: AED 15,000
• Failure to notify FTA about applying VAT on margin scheme: AED 2,500
• Failure to comply with designated zone transfer rules:
  • AED 50,000 or 50% of unpaid VAT (whichever is higher)
• Failure to issue a tax invoice: AED 5,000 for each missing invoice
• Failure to issue tax credit notes: AED 5,000 for each
• Failure to comply with electronic invoice rules: AED 5,000 for each incorrect invoice

Importance of VAT Compliance

VAT compliance protects businesses from:

• Paying heavy monetary fines.
• Facing reputational risks in the market.
• Losing trust with clients and authorities.
• Getting into unnecessary disputes with FTA.

Having proper VAT guidance from professionals like Mubarak Al Ketbi (MAK) Auditing ensures smooth filing and full compliance.

Benefits of Professional VAT Assistance

Working with expert consultants in UAE helps in:

• Avoiding VAT penalties by filing returns on time.
• Proper VAT recovery on input tax and imports.
• Reducing errors in VAT filing and reporting.
• Building credibility and goodwill in the market.
• Getting proper advice on VAT record-keeping and disclosures.

🥇 What Can Help – Mubarak Al Ketbi (MAK) Auditing

VAT penalties in UAE can be avoided if businesses plan properly and work with professionals. Mubarak Al Ketbi (MAK) Auditing provides VAT registration, consultancy, return filing, and compliance solutions. With our experts, businesses can focus on growth instead of worrying about fines. Remember, an ounce of prevention is worth a pound of cure.

For more information visit our office:

• 📍 Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates
• 📞 Contact/WhatsApp: +971 50 276 2132