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How tax penalties work in the United Arab Emirates?

How tax penalties work in the United Arab Emirates?

Guide5 min read | Posted on April 2, 2024 | By Zoho Books Team

The UAE cabinet has approved the list of administrative penalties that will be imposed on businesses for violations of the tax laws. Each fine or penalty will be no less than 500 AED and no more than triple the value of the tax on the transaction in question.

The following tables list the administrative penalties for violations related to tax procedures, VAT, and excise tax.

Violations related to tax procedure

Description of violation	Administrative penalty (in AED)
Failure to keep the required records specified by the tax procedures law and the tax law.	10,000 for the first time. 50,000 for each repeat violation.
Failure to submit the required records in Arabic when requested by the Authority.	20,000
Failure to submit a registration application within the timeframe specified by the tax law.	20,000
Failure to submit a deregistration application within the timeframe specified by the tax law.	10,000
Failure to inform the Authority of an amendment to tax records that needs to be submitted.	5,000 for the first time. 15,000 in case of repetition.
Failure to notify the authority that a legal representative has been appointed for the business within the specified timeframe. The penalties will be charged to the legal representative.	20,000
Failure of the legal representative to file a tax return within the specified timeframe. The penalties will be charged to the legal representative.	1,000 for the first time. 2,000 in case of repetition within 24 months.
Failure of the Registrant to submit a tax return within the timeframe specified by the tax law.	1,000 for the first time. 2,000 in case of repetition within 24 months.
Failure to pay the tax stated in the tax return/tax assessment form within the timeframe specified by the tax law.	The taxable person will incur a late payment penalty as follows: 2% of the unpaid tax is due immediately. 4% 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%.
Submission of incorrect tax returns.	Two penalties are applied: Fixed penalty of: (3,000) for the first time. (5,000) in case of repetition. Percentage-based penalty shall be applied on the amount unpaid to the Authority due to the error as follows: (50%) if the Registrant does not make a voluntary disclosure or he made the voluntary disclosure after being 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%) if the Registrant makes a voluntary disclosure after being notified of the tax audit and before the Authority starts the tax audit. (5%) if the Registrant makes a voluntary disclosure before being notified of the tax audit by the Authority.
Voluntary disclosure by a business of errors in a tax return, tax assessment, or refund application.	Two penalties are applied: Fixed penalty of: (3,000) for the first time. (5,000) in case of repetition. Percentage-based penalty shall be applied on the amount unpaid to the Authority due to the error as follows: (50%) if the Person/Taxpayer makes the disclosure after either of the following conditions applies: a) they have been notified of the tax audit and the Authority has started the audit process, or b) they have been asked for information relating to the tax audit. (30%) if the Person/Taxpayer makes a voluntary disclosure after being notified of the tax audit but before the start of the tax audit. (5%) if the Person/Taxpayer makes a voluntary disclosure before being notified of the tax audit by the Authority.
Failure of a business to voluntarily disclose errors in a tax return, tax assessment, or refund application before a tax audit.	Two penalties are applied: Fixed penalty of: (3,000) for the first time. (5,000) in case of repetition. 50% of the amount unpaid to the Authority due to the error.
Failure of a person or business to facilitate the work of the tax auditor.	20,000
Failure of the Registrant to calculate tax on behalf of another person as required under the tax law.	The Registrant shall incur a 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%.
Failure to account for tax due on import of goods as required under the tax law.	50% of unpaid or undeclared tax.

Violations related to VAT

Description of violation	Administrative penalty (in AED)
Failure by the taxable person/business to display prices inclusive of tax.	15,000
Failure by the taxable person/business to notify the Authority of applying tax based on the margin.	2,500
Failure to comply with conditions and procedures related to the transfer of goods in designated zones.	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 by the taxable person/business to issue a tax invoice or alternative document when making any supply.	5,000 for each missing tax invoice or alternative document.
Failure by the taxable person/business to issue a tax credit note or alternative document.	5,000 for each missing tax credit note or alternative document.
Failure by the taxable person to comply with the conditions and procedures regarding the issuance of electronic tax invoices and electronic tax credit notes.	5,000 for each incorrect document.

Violations related to excise tax

Description of violation	Administrative penalty (in AED)
Failure by the taxable person/business to display prices inclusive of tax.	15,000
Failure to comply with conditions and procedures related to the transfer of excise goods in designated zones.	The penalty shall 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 by the taxable person to provide the authority with price lists for the excise goods they produce, import or sell.	50,000 for the first time. 20,000 in case of repetition.

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How tax penalties work in the United Arab Emirates?

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