The United Arab Emirates has introduced a few significant reforms in the tax laws, including the imposition of Value Added Tax (VAT). According to this, all tax-registered companies are required to pay a 5 percent value-added tax on taxable goods and supplies. The supplies are categorized in exempted, zero-rated, and taxable supplies. However, a failure to comply with the regulations can leads the businesspeople to face VAT penalties that are pretty much administrative.

Don’t know about it all? Keep reading the article to get a detailed overview and possible ways to avoid penalties of administrative nature.

Administrative penalties under tax procedures

The cabinet of UAE has issued a comprehensive list of VAT penalties and fines that are applicable in case of non-compliance with regulations. Moreover, an additional amount of fines is imposed on the people who fail to comply or breach the VAT Law. These penalties are administrative in nature. Let’s consider the detail:

· The taxable person failed to show prices inclusive of tax

Every individual liable to the tax must show the price lists of taxable goods and services that are VAT inclusive. A failure to comply with this requirement can lead to a fine of AED 15,000. However, the supplies of import/export and customers are registered free of such conditions.

· The taxable person failed to notify FTA about Tax charges margin

 Every taxable individual is required to calculate the tax based on profit margins for the supply of second-hand goods, collectors’ products, antiques, and other historical items. The profit margins should be notified to the FTA. A failure to do so can lead to a fine of AED 2,500.

·The Individual failed to comply with laws of goods movement to the designated zones

It is imperative to note that a designated zone is considered outside the UAE to make it a VAT-free area. Owing to this, goods transfer between the VAT and designated zones is not subjected to be levied. There are some set conditions for it.

A person failed to comply with the procedures and conditions of the designated zone will have to face an administrative penalty. The fine is 5% of the chargeable tax or AED 50,000. In case that you are unable to understand the regulation for the designated zone, you may get advice from the best VAT consultancy in Dubai for a comprehensive understanding and compliance of the laws.

· The taxable individual failed to issue tax documents on the time of supply

Every individual liable to tax is required to provide a tax invoice for a supply of goods is made. The registrant has to issue the invoice. So, if the person is failed to issue any tax document for a taxable supply, he has to pay AED 5,000 penalty for each invoice.

· The taxable individual has failed to issue a tax credit note

A credit note is an invoice that records the amendment of taxable supplies if it is reduced or canceled. The individual supplying goods are services that have to provide an electronic or handwritten credit note. In a case of failure, a fine of AED 5,000 for each Tax Credit Note will be imposed.

Top ways to avoid administrative penalties

The Federal Tax Authority is recommended to take all essential measures for regulating the businesses to comply with VAT regulations. The measures include incentives and penalties. The course of action in response to the activity of taxable individual or group helps the state to maintain law and order in the country.

However, taxable individuals should live a vigilant life to avoid strict administrative penalties by maintaining the record of all required documents. Here are given a few tips to help you stay at a bay from severe repercussions:

Maintain supply records

Businesses are all about the sale and purchase of goods and services. You should consider complying with your administrative responsibilities to comply with the laws. For this purpose, maintain a proper record of all supplies of goods and services. Keep the invoices and tax documents at the time of supply transfer. It will help you avoid penalties.

Issue Credit Note timely

The best way to stay away from fines and penalties is to manage every task and activity in time. Therefore, you should consider issuing Credit Note before the time of supply and keep the document safe to display it whenever required by the authorities. Remember! Avoid crying over spilled milk by stay prepared for every situation.

Register for VAT

Most importantly, you should consider VAT registration in the earliest possible time to comply with the modifying policies and regulations without any inconvenience. For this, you can get assistance from the best VAT consultancy in Dubai based professionals to fulfill all requirements of VAT for registration. It will help you to realize your administrative responsibilities and ways to comply with the designated obligations.

Keynote: Pro-activeness can save you from penalties!

Summing up, administrative penalties are the responsibility of the careless behavior of the taxable individual while VAT compliance. If you want to avoid the fines, you should comply with the requirements of VAT in a pro-active manner.

The United Arab Emirates has introduced a few significant reforms in the tax laws, including the imposition of Value Added Tax (VAT). According to this, all tax-registered companies are required to pay a 5 percent value-added tax on taxable goods and supplies. The supplies are categorized in exempted, zero-rated, and taxable supplies. However, a failure to comply with the regulations can leads the businesspeople to face VAT penalties that are pretty much administrative.

Don’t know about it all? Keep reading the article to get a detailed overview and possible ways to avoid penalties of administrative nature.

Administrative penalties under tax procedures

The cabinet of UAE has issued a comprehensive list of VAT penalties and fines that are applicable in case of non-compliance with regulations. Moreover, an additional amount of fines is imposed on the people who fail to comply or breach the VAT Law. These penalties are administrative in nature. Let’s consider the detail:

· The taxable person failed to show prices inclusive of tax

Every individual liable to the tax must show the price lists of taxable goods and services that are VAT inclusive. A failure to comply with this requirement can lead to a fine of AED 15,000. However, the supplies of import/export and customers are registered free of such conditions.

· The taxable person failed to notify FTA about Tax charges margin

 Every taxable individual is required to calculate the tax based on profit margins for the supply of second-hand goods, collectors’ products, antiques, and other historical items. The profit margins should be notified to the FTA. A failure to do so can lead to a fine of AED 2,500.

· The Individual failed to comply with laws of goods movement to the designated zones

It is imperative to note that a designated zone is considered outside the UAE to make it a VAT-free area. Owing to this, goods transfer between the VAT and designated zones is not subjected to be levied. There are some set conditions for it.

A person failed to comply with the procedures and conditions of the designated zone will have to face an administrative penalty. The fine is 5% of the chargeable tax or AED 50,000. In case that you are unable to understand the regulation for the designated zone, you may get advice from the best VAT consultancy in Dubai for a comprehensive understanding and compliance of the laws.

·The taxable individual failed to issue tax documents on the time of supply

Every individual liable to tax is required to provide a tax invoice for a supply of goods is made. The registrant has to issue the invoice. So, if the person is failed to issue any tax document for a taxable supply, he has to pay AED 5,000 penalty for each invoice.

· The taxable individual has failed to issue a tax credit note

A credit note is an invoice that records the amendment of taxable supplies if it is reduced or canceled. The individual supplying goods are services that have to provide an electronic or handwritten credit note. In a case of failure, a fine of AED 5,000 for each Tax Credit Note will be imposed.

Top ways to avoid administrative penalties

The Federal Tax Authority is recommended to take all essential measures for regulating the businesses to comply with VAT regulations. The measures include incentives and penalties. The course of action in response to the activity of taxable individual or group helps the state to maintain law and order in the country.

However, taxable individuals should live a vigilant life to avoid strict administrative penalties by maintaining the record of all required documents. Here are given a few tips to help you stay at a bay from severe repercussions:

Maintain supply records

Businesses are all about the sale and purchase of goods and services. You should consider complying with your administrative responsibilities to comply with the laws. For this purpose, maintain a proper record of all supplies of goods and services. Keep the invoices and tax documents at the time of supply transfer. It will help you avoid penalties.

Issue Credit Note timely

The best way to stay away from fines and penalties is to manage every task and activity in time. Therefore, you should consider issuing Credit Note before the time of supply and keep the document safe to display it whenever required by the authorities. Remember! Avoid crying over spilled milk by stay prepared for every situation.

Register for VAT

Most importantly, you should consider VAT registration in the earliest possible time to comply with the modifying policies and regulations without any inconvenience. For this, you can get assistance from the best VAT consultancy in Dubai based professionals to fulfill all requirements of VAT for registration. It will help you to realize your administrative responsibilities and ways to comply with the designated obligations.

Keynote: Pro-activeness can save you from penalties!

Summing up, administrative penalties are the responsibility of the careless behavior of the taxable individual while VAT compliance. If you want to avoid the fines, you should comply with the requirements of VAT in a pro-active manner.

It is imperative to state that VAT compliance is an obligatory requirement. Don’t forget to understand the procedures of compliance to fulfill the requirements as per the laws.

imperative to state that VAT compliance is an obligatory requirement. Don’t forget to understand the procedures of compliance to fulfill the requirements as per the laws.