There has been a latest development in the penalties on defaulting on the payment of VAT and ESR by the FTA(Federal Tax Authority). The main motive behind these changes is to help businesses recover from the hit due to the global pandemic. The department has been active to keep the businesses motivated by discounts and avoid any defaults on VAT compliance. These changes were implemented from 28 june 2021. All taxpayers get the benefits of 70% waiver on the penalties that were unpaid on 28 June 2021 for specific requirements.
Although, it has been quite some time when these changes were implemented, right now the scenario has changed!
All these changes were implemented for businesses to review their historic filing, and rectify all errors as notified in the audit.
Businesses should also review any outstanding penalties to determine if they can benefit from relief. To help you further, we are going to specify all the imposed fines for specific penalties.
VAT Penalties 2022
Reason |
Penalty amount |
| Late VAT Registration penalty | AED 10,000
|
| Late VAT De-registration | AED 1,000, if delay on the same date and then monthly penalty of max 10,000.
|
| Late VAT return filing penalty | 2% of the unpaid tax is due immediately.
The 4% monthly penalty is due after one month from the due date of payment, and on the same date monthly thereafter, on the unsettled Tax amount to date.
|
| Submission of Incorrect tax returns | AED 1,000 for the first time and AED 2,000 in case of repetition.
|
| Failure in submitting the required data and records for VAT filing. | AED 20,000 |
| Failure to inform the Authority of any circumstance that requires the amendment of the information pertaining to its Tax record kept by Authority | AED 5,000 for the first time and AED 10,000 in case of repetition.
|
| Failure of the Legal Representative of the Taxable Person to inform the Authority of its appointment.
|
AED 10,000 |
| Submission of a VAT Voluntary Disclosure by Taxpayer with mistakes. | AED 1,000 for the first time and AED 2,000 in case of repetition.
|
| Failure of the Person conducting Business to facilitate the work of the Tax Auditor | AED 20,000 |
| Person not accounting for any due Tax related to import of goods.
|
50% of unpaid or undeclared Tax (No change) |
| Failure to show prices on tax invoice inclusive of tax.
|
AED 15,000 (No change)
|
| Failure to inform FTA of applying tax based on the margin.
Failure to comply with conditions & procedures related to the transfer of goods in designated zones.
|
AED 2,500 (No change)
The penalty will be the higher of AED 50,000 or 50% of the tax, if any, unpaid on the goods as the result of the violation. |
| Failure to issue a tax invoice while making any supply | AED 5,000 for each missing tax invoice or alternative document. |
| Failure to issue a tax credit note
|
AED 5,000 for each missing tax credit note or alternative document. |
| Failure to follow the conditions regarding the issuance of electronic tax invoices and tax credit notes. | AED 5,000 for each incorrect document |
Penalties for ESR in UAE 2022:
Reasons for Penalty Imposition |
Penalty Amount |
| 1. Failure or delay to submit ESR Notification within deadline | AED 20,000 |
| 2. Failure or delay to submit ESR Report and any relevant information or documents. | AED 50,000. |
| 3. Repeatedly committed one of the two violations mentioned in Point 2 during the immediately following financial year. | AED 400,000 |
| 4. Knowingly providing inaccurate information about Economic Substance Regulation. | AED 50,000 |
These are some of the penalties that you will have to pay if you default on any of the above-mentioned conditions. Once, you receive a notification regarding the penalty, then you have to counter-appeal for the same fine. If you appeal with the right reason and documented proof, then there are chances of some relief being provided by the tax authorities.
How to appeal for VAT penalties:
If you get a penalty for the non-payment of VAT, then you have to apply for the VAT reconsideration in the United Arab Emirates within 20 business days of getting the penalty report. Here you also have to provide proof of the reason for the VAT reconsideration for the authorities to reconsider the decision and waive off the issued penalty for the VAT payments.
How to appeal for ESR penalties in UAE:
If you received your ESR penalty, then you will have to register the appeal with the Ministry of Finance portal. There you will find the steps to complete your appeal, just like the VAT appeal you have to provide adequate proof for the authorities to reconsider and waive off your penalty.
