Amendment in VAT Penalties

Amendment in Administrative Penalties UAE VAT

The Federal Tax Authority (FTA) assigned a public clarification on 28th April 2021 with regards to the amendments for provisions under the Cabinet Decision No 40 of 2017 for administrative penalties. VAT fines consist of administrative penalties, which are the regulatory fines levied on a person or an enterprise by the FTA for violating the requirements in the UAE Tax Law.

The new resolution allows the FTA the right to lessen previously unpaid administrative penalties to 30% of the total penalties where the registrant has paid all taxes due by 31 December 2021.

Fines can certainly be prevented by taking the essential provisions for non-compliance while filing the VAT report. Companies have more time to evaluate their data & submit a correct VAT filing.

How is VAT penalty calculated?

The taxable person will sustain a late payment fine as mentioned:

–  2% of the unpaid tax is due instantly.

–  4% is due on the 7th day after the deadline for payment.

–  1% daily penalty will be alleged on any sum of money that is still overdue one calendar month after the deadline for payment, up to a maximum of 300%.

Significant amendments under the new Tax penalty law

Under the new Decision, revisions were put together to some provisions under administrative penalties on tax procedures, excise tax, & value-added tax.

The amendment decreased tax penalties for non-compliance with tax procedures. The most significant modification is the reduction of penalties for tax payment default. There is also a decrease in penalties for late payment of tax & voluntary disclosure of errors before the taxpayers are notified by the Authority.

The new Administrative Penalties for Violation of Tax Law also identifies & changes the “due date” for payment in Tax Assessment & Voluntary Disclosure.

The amendment also maintains the limit on the fines at 300% as under the old law. Under the new tax law, penalties are considerably lesser than the ones under the old law.

Additionally, any taxpayer who meets specific conditions may gain from a seventy percent (70%) tax waiver off their penalties under the latest revision.

Due Date under the New Tax Penalty Law

The new tax penalties law declares that the due date for the penalty enforced on non-payment of Tax Assessment & Voluntary Disclosure will be as follows;

  • Twenty business days of the receipt of tax assessment in case of Tax Assessment
  • Twenty business days of subsequently proposing of a voluntary disclose in case of Voluntary Disclosure

Activities encouraging Administrative Penalty under VAT


Violations  Administrative Penalty (AED)
Failure by a Taxable Person to show prices including Tax 15,000
Failure by a Taxable Person to inform the FTA concerning charge of Tax established on the margin 2,500
Failure to conform with provisions & procedures of preserving goods in a Designated Zone or shifting them to another Designated Zone Higher of AED 50,000 or 50% of the tax chargeable because of the violation
Failure by a Taxable Person to issue a Tax Invoice 5,000 for each Tax Invoice or alternative document
Failure by a Taxable Person to issue a Tax Credit Note 5,000 for each Tax Credit Note or alternative document
Failure by a Taxable Person to conform with the provisions & procedures with regards to the issue of electronic Tax Invoices & electronic Tax Credit Notes 5,000 for each incorrect document

Redetermination of Administrative Penalties prior to effective date

Under the new amendment, the FTA has the authority to diminish formerly remaining fines by 70% if tax pax payers meet specific conditions as mentioned:

–  Administrative Penalties included in the Cabinet Decision No 40 of 2017 has been enforced on a taxpayer before the effective date of the new amendment Resolution which was not fully settled by the effective date or;

Where the Taxpayer meets the following:

–  Pays payable tax completely but not later than 31st day of December 2021;

–  If 30% of total administrative penalties on a taxpayer is unpaid till the effective date of the new Decision but not later than the 31st day of December 2021;

The new resolution came into effect on the 28th day of June 2021, sixty days after its issuance.

How can we help?

Below the new amendment, any taxpayer who satisfies specific requirements, as mentioned above, would benefit from the leverage of reduced enforced penalties until the 31st day of December 2021.
Our VAT team at Brooks Management Consultancies assists a taxpayer; that is; a single person or an entity requires to evaluate & monitor their tax position. Contact us today.

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