Comprehensive Overview of Penalties Under the UAE VAT Law: FAQs

What happens if I violate the provisions of the UAE VAT Law?

When a taxpayer violates any provisions set forth by the Federal Tax Authority, the authority will issue an Administrative Penalty Assessment and notify the person within five business days.

What happens if I fail to maintain the records specified by the tax law?

You will face a penalty of AED 10,000 for the first time and AED 50,000 for each repeat violation.

What happens if I fail to submit the required records in Arabic when requested by the authority?

You will face a penalty of AED 20,000.

What happens if I fail to submit the VAT registration application within the time period specified by the tax law?

You will face a penalty of AED 20,000.

What happens if I fail to submit the deregistration application within the time period specified by the tax law?

You will face a penalty of AED 10,000.

What happens if I fail to inform the tax authority of changes in my tax records that need to be submitted?

You will face a penalty of AED 5,000 for the first time and AED 15,000 for each repeat violation.

What happens if I fail to notify the tax authority that a legal representative has been appointed for my business within the specified time period?

The legal representative will be charged a fine of AED 20,000.

What happens if I fail to file a tax return within the specified time period?

You will be charged with a fine of AED 1,000 for the first violation and AED 2,000 for a repeat violation within 24 months.

What happens if a legal representative fails to file a tax return within the specified time period?

The legal representative will be charged with a fine of AED 1,000 for the first violation and AED 2,000 for a repeat violation within 24 months.

What happens if I fail to pay the amount stated in the tax return or tax assessment form within the specified time period?

You will incur a late payment penalty as follows: 

• 2% of the unpaid tax is due immediately.

• 4% of any amount still unpaid is due on the seventh day following the deadline for payment.

• 1% daily penalty will be charged on any amount that is still unpaid one calendar month after the deadline for payment, up to a maximum of 300%.

What happens if I submit incorrect tax returns?

Two penalties are applied:

• Fixed penalty of:

  • AED 3,000 for the first time

  • AED 5,000 for each repeat violation

• Percentage-based penalty as follows:

  • 50% of the amount unpaid in error if you do not make a voluntary disclosure (or if you make the voluntary disclosure after you’ve been notified of the tax audit and the authority has started the tax audit process, or after being asked for information relating to the tax audit, whichever takes place first).

  • 30% of the amount unpaid in error if you make a voluntary disclosure after being notified of the tax audit but before the authority starts the tax audit.

  • 5% of the amount unpaid in error if you make a voluntary disclosure before being notified of the tax audit by the authority.

What happens if I voluntarily disclose the errors in my tax return, tax assessment form, or refund application?

You will incur a fixed penalty of AED 3,000 for the first time or AED 5,000 for repeat violations, but the percentage-based penalty is adjusted based on when the disclosure is made:

• 50% of the amount unpaid in error if you make the disclosure after either of the following: a) you have been notified of the tax audit and the Authority has started the audit process, or b) you have been asked for information relating to the tax audit.

• 30% of the amount unpaid in error if you make a voluntary disclosure after being notified of the tax audit but before the start of the tax audit.

• 5% of the amount unpaid in error if you make a voluntary disclosure before being notified of the tax audit by the tax authority.

What happens if I fail to voluntarily disclose the errors in my tax return, tax assessment form, or refund application?

The fixed penalty of AED 3,000 for the first time or AED 5,000 for repeat violations still applies, plus a percentage-based penalty of 50% of the amount unpaid in error.

What happens if I fail to facilitate the work of the tax auditor?

You will incur a penalty of AED 20,000.

What happens if I fail to calculate tax on behalf of another person as required under the tax law? 

You will incur the standard late payment penalty as follows:

• 2% of the unpaid tax is due immediately once the payment is late.

• 4% of the amount of tax which is still unpaid is due on the seventh day following the deadline for payment.

• 1% daily penalty will be charged on any amount that is still unpaid one calendar month after the deadline for payment, up to a maximum of 300%.

What happens if I fail to account for tax due on import of goods as required under the tax law?

You will face a penalty of 50% of the unpaid tax.

What will happen if a business does not display prices inclusive of tax?

The taxable business will incur a penalty of AED 15,000.

What happens if I fail to notify the authority of applying tax based on the margin?

You will face a penalty of AED 2,500.

What happens if I don’t comply with the procedures related to the transfer of goods in designated zones?

You will face a penalty of AED 50,000 or 50% of the unpaid tax on the goods.

What will happen if I fail to provide a tax invoice or an alternative document while making a supply?

You will incur a penalty of AED 5,000 for each missing invoice or alternative document.

What happens if I fail to issue a tax credit note or an alternative document?

You will incur a penalty of AED 5,000 for each missing credit note or alternative document.

What happens if I fail to provide the authority with the price lists for the excise goods I produce, sell or import?

You will face a penalty of AED 50,000 for the first time and AED 20,000 for each repeat violation.