The business organizations have to pay value-added tax to the federal tax authority in the United Arab Emirates instead of the usual income tax. The tax amount keeps changing according to the value of goods and services in the case of value-added tax, which causes issues to the taxpayers. They often suffer from tax calculation and paying the due amount to the authorities.
Apart from tax calculation, the taxpayers have to register for VAT, take care of due dates of various processes, pay the tax, file for tax returns, as well as manage deregistration if they do not fall in the category of tax payment anymore. The state authorities have defined the detailed procedure of these, and failure of comprehension can cause penalties to the taxpayers.
Dig deeper into this article to explore a brief guide about VAT penalties in the UAE and avoid them in the future.
Top 7 Situations Leading to VAT Penalties in UAE
VAT payments are like a hanging sword on the head of business organizations. It requires paying heed to the minutest details. The business owners often do not have enough time to follow the details, or they lack the necessary skills required for this. In return, they face penalties that do not only cause monetary loss but also hurt their reputation in the market.
Here are the top situations that can lead business organizations to VAT penalties in UAE.
1. Late Tax Return Filing
The business organizations that secure more than one hundred fifty million Emirati dirhams annual turnover have the responsibility of filing for VAT tax and return in the UAE. If they fail to file tax after exceeding this threshold, they have to pay penalties. Business organizations acquire the services of the best VAT consultancy in Dubai to closely follow their progress and file for tax payment as soon as they cross the threshold to avoid facing penalties and a bad reputation.
2. Faulty Pricing of Goods and Services
One of the most crucial situations that can lead business organizations towards penalties and punishment is sharing faulty pricing of goods and services. In the case of VAT, the tax amount is decided according to the value of goods and services, lowering, which can reduce the tax amount. The authorities have imposed a penalty of AED 15,000 in case any business is caught sharing wrong prices of goods and services.
3. Poor Accounting Record Maintenance
Maintaining the accounting records is one of the most important conditions of the right calculation of tax amount in the UAE. The business organizations have to provide the record to the authorities to show transparency. However, in the case of poor accounting record maintenance, they have to pay a penalty of AED 10,000. The repeat offenders have to pay a higher penalty amount of AED 50,000.
4. Submitting Incorrect Tax Returns
One of the most important responsibilities of taxpayers in the United Arab Emirates is filing for tax returns. If they do not fulfill their responsibility diligently and submit incorrect tax return forms, they have to pay a penalty of AED 3,000. In case they repeat the offense of incorrect tax return submittal, the penalty amount will increase to AED 5,000.
5. Not Disclosing Tax Due on Imports
The business organizations have to pay tax on imports of their goods and services. They have the responsibility of disclosing the tax amount due to their imports. If they fail to do so, due to their lack of expertise or even due to fraudulent activities, they are liable to pay heavy penalties to the authorities. The penalty amount will be decided according to the value of imported goods and services.
6. Failing to Inform About Business Amendments
If a business organization makes an amendment in its operations, goods, or services, it has the responsibility of sharing details with the relevant tax authority. In case the organization fails to inform the authorities about business amendments, they can face a penalty of AED 5000. In addition to it, if they repeat the offense, they will have to pay a penalty amount of AED 15,000.
7. Failing to Deregister VAT on Time
If the annual turnover of any business organization falls below the VAT threshold, the organization can deregister from VAT payment. However, following the time span limit is crucial. Failing to deregister VAT on time can make them liable to pay a penalty of AED 10,000. You can hire the best VAT consultancy in Dubai to let the experts manage your VAT registration, payments and deregistration on time to avoid penalties.
Consult VAT experts to avoid penalties!
The business operations keep the owners entangled to the point that they fail to monitor VAT details. On the other hand, some business owners lack the required skills in the field. If you also belong to any of these categories, do not add loss to your account by paying penalties. Get in touch with VAT experts to take care of all the little details and follow the procedure on your behalf in order to maximize your profitability while avoiding penalties.