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UAE VAT Administrative and Tax Evasion Penalties

TAXHELP Blog

UAE VAT Administrative and Tax Evasion Penalties

From January 1st, the way UAE businesses conduct their day-to-day operations and the spending habits of residents has seen a major shift as the UAE moves away from tax-free nation by levying a five per cent Value-Added Tax (VAT) on goods and services.

As part of a GCC agreement, the UAE has imposed 5% VAT on a host of goods and services. Known as a consumer tax, VAT has been levied on certain household items, fees and charges of banking and financial services, utility bills, automobiles, telecom products, electronics, certain segments of education, retail among others.

For businesses required to register and comply with VAT in their daily operations, the FTA has determined Administrative and Tax Evasion Penalties in case of businesses making errors in VAT implementation or trying to evade tax.

Administrative Penalties

Administrative penalties are intended to address non-compliance and encourage compliance. The FTA has the power to waive or reduce penalties at its discretion (e.g. taxable person has a reasonable excuse for error).

Examples:

  • The person conducting a business fails to keep required records and other information
  • The person conducting a business fails to submit the data, records and documents related to tax in Arabic language when requested by the FTA;
  • The taxable person fails to comply with VAT invoicing form and requirements

Tax Evasion Penalties

Tax evasion is where a person uses illegal means to either lower the tax or not pay the tax due, or to obtain a refund to which he is not entitled under the law. The imposition of a penalty under tax law does not prevent other penalties being issued under other laws.

Tax Evasion Examples:

  • Where a person deliberately provides false information and data and incorrect information to the FTA;
  • Where a person deliberately conceals or destroys documents or other material that he is required to maintain and provide to the FTA.

In order to avoid getting penalized by the FTA, all businesses must make sure to fully comply with the VAT regime if they haven’t already done so.

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