INTRODUCTION

Administrative penalties are monetary amounts imposed upon a person by the Federal Tax Authority (FTA) for breaching the provisions of the Tax Law. The Federal Tax Authority has announced revisions/reductions in Administrative Penalties applied for VAT non-compliance via Cabinet Decision No. 49/2021. Multiple reductions have been made to the penalties to provide relief to taxable persons.

 

ON ADMINISTRATIVE PENALTIES IMPOSED FOR VIOLATING THE STATE’S TAX LAWS

 

  1. The person doing business failed to keep the required records and other information specified in the Tax Procedure Law and the tax law
  • AED 1,000 for the first time.
  • AED 2,000 in case of repetition.

 

  1. The person doing business failed to submit data, records and documents related to tax in Arabic to FTA upon request.
  • AED 20,000

 

  1. The taxable person failed to submit the registration application within the time limit specified in the tax law.
  • AED 10,000

 

  1. The Registrant failed to submit a request to cancel the registration within the time limit specified in the tax law.
  • AED 1,000 upon delay in submitting the application and on the same date per month, with a maximum of AED 10,000

 

  1. The Registrant failed to inform FTA of any situation that may require amending the information related to its tax record kept with FTA.
  • AED 5,000 for the first time.
  • AED 10,000 in case of repetition.

 

  1. The legal representative of the taxable person failed to report its appointment as a legal representative of the taxable person within the specified dates, provided that the penalties in this case shall be from the legal representative’s own money.
  • AED 10,000

 

  1. The legal representative of the taxable person failed to submit the tax return within the specified dates, within the specified dates, provided that the penalties in this case shall be from the legal representative’s own money.
  • AED 1,000 for the first time.
  • AED 2,000 in case of repetition within 24 months.

 

  1. The Registrant failed to submit the tax return within the time limit specified in the tax law.
  • AED 1,000 for the first time.
  • AED 2,000 in case of repetition within 24 months.

 

  1. The taxable person failed to pay the tax shown as a tax payable in the tax return or voluntary declaration that was submitted, or the tax assessment that was notified within the time limit specified in the tax law.

 

  1. The taxable person shall pay the penalty applicable to the late payment of the payable tax, with a maximum of 300%, in accordance with the following:

    a. 2% of the unpaid tax due on the day following the due date for payment, upon late payment of the payable tax.

          b. 4% monthly penalty due after one month from the payment due date, and on the same date every month after that, on the    amount of tax that has not been paid to date.

 

  1. For the purposes of this penalty, the due date for payment in the event of voluntary declaration and tax assessment is as follows:

   a. In the case of the voluntary declaration, 20 business days from the date of its submission.

           b. In the case of tax assessment, 20 business days from the date of its receipt.

 

 

  1. The Registrant submitted an incorrect tax return.

    1. A fixed penalty is imposed:

  • AED 1,000 for the first time.
  • AED 2,000 in case of repetition.

 

  1. As an exception to Clause (1) of this penalty, if the incorrect tax return results in a tax difference less than the fixed fine mentioned in Clause (1) of this penalty, a fine equal to the tax difference shall be imposed, provided it is not less than AED 500.

 

  1. Whoever corrects its tax return before the payment due date shall be exempted from the penalty specified in Clauses (1) and (2) of this penalty.

 

  1. The person / taxpayer makes a voluntary declaration of errors in the tax return, tax assessment or tax refund application, in accordance with Clauses (1) and (2) of Article 10 of the Tax Procedures Law.

           Without prejudice to the consequences of the penalty mentioned in Clause (10) hereof, a proportional penalty shall be imposed on the amount of the difference between the tax calculated and the tax that should have been calculated, in accordance with the following:

  1. 5% on the difference amount in the event that the voluntary declaration was submitted within one year of the due date of the tax return, tax assessment, or related refund application.
  2. 10% on the difference amount in the event that the voluntary declaration was submitted during the second year from the due date of the tax return, tax assessment, or related refund application
  3. 20% on the difference amount in the event that the voluntary declaration was submitted during the third year from the due date of the tax return, tax assessment, or related refund application.
  4. 30% on the difference amount in the event that the voluntary declaration was submitted during the fourth year from the due date of the tax return, tax assessment, or related refund application.
  5. 40% on the difference amount in the event that the voluntary declaration was submitted after the fourth year from the due date of the tax return, tax assessment, or related refund application

 

  1. The person / taxpayer fails to make a voluntary declaration of an error in the tax return, tax assessment or tax refund application, in accordance with Clauses (1) and (2) of Article 10 of the Tax Procedures Law, before being notified of FTA’s tax

   Without prejudice to the consequences of the penalty mentioned in Clause (10) hereof, shall be imposed a person:

  1. A penalty of 50% on the amount of error;
  2. A penalty of 4% for each month or part of the month from any of the following: a) Tax unpaid to FTA, from the date that payment is due for the relevant tax period until the date of receipt of the tax assessment. b)The tax that has not been refunded to FTA due to an unjust tax refund, from the date of the tax refund from FTA until the date of receiving the tax assessment.

 

  1. The person doing business failed to provide facilities to the tax auditor in violation to the provisions of Article (21) of the Tax Procedure Law.
  • AED 20,000

 

  1. The Registrant failed to calculate tax on behalf of another person when the registered taxable person is obligated to do so in accordance with the tax law

The Registrant shall pay the penalty applicable to the late payment of the payable tax, with a maximum of 300%, in accordance with the following:

  1. 2% of the unpaid tax due on the day following the due date for payment, upon late payment of the payable tax.
  2. 4% monthly penalty due after one month from the payment due date, and on the same date every month after that, on the amount of tax that has not been paid to date.

For the purposes of this penalty, the due date for payment in the event of voluntary declaration and tax assessment is as follows:

  1. In the case of the voluntary declaration, 20 business days from the date of its submission.
  2. In the case of tax assessment, 20 business days from the date of its receipt.

 

  1. The taxable person failed to calculate any tax that may be due on importing goods in accordance with the tax law.
  • 50% of unpaid or undeclared tax.

 

ON ADMINISTRATIVE VIOLATIONS AND PENALTIES RELATED TO THE APPLICATION OF FEDERAL DECREE-LAW NO. (7) OF 2017 ON EXCISE TAX

 

  1. The taxable person failed to present the prices as inclusive of the tax.
  • AED 5,000

 

  1. Failure to comply with the conditions and procedures for transporting the excise goods from one designated zone to another, and the mechanism of preserving, storing and processing them in it.
  • The penalty shall be the higher of AED 50,000 or 50% of the tax, if any, imposed on the goods related to the violation.

 

  1. The taxable person failed to provide FTA with price lists of excise goods it has produced or imported.
  • AED 5,000 for the first time.
  • AED 10,000 for each repetition.

 

ON ADMINISTRATIVE VIOLATIONS AND PENALTIES RELATED TO THE APPLICATION OF FEDERAL DECREE-LAW NO. (8) OF 2017 ON VALUE ADDED TAX

 

  1. The taxable person failed to present the prices as inclusive of the tax.
  • AED 5,000

 

  1. The taxable person failed to report to FTA about its application of the tax on the margin basis.
  • AED 2,500

 

  1. Failure to comply with the necessary conditions and procedures for storing goods in a designated zone or moving them to another designated zone.
  • The penalty shall be the higher of AED 50,000 or 50% of the tax, if any, imposed on the goods related to the violation.

 

  1. The taxable person failed to issue the tax invoice or alternative document when making any supply.
  • AED 2,500 for each case discovered

 

  1. The taxable person failed to issue the tax credit note or alternative document.
  • AED 2,500 for each case discovered

 

  1. The taxable person failed to comply with the conditions and procedures related to issuing the tax invoice and tax credit note electronically
  • AED 2,500 for each case discovered

 

DETERMINATION OF PENALTIES APPLICATION DATE IN SPECIAL CASES

If any penalty is applied monthly on the same date, the date for any month in which there is no charge for that date shall be the first day of the following month, provided that it applies for the other months on the same date on which the monthly penalty was first imposed.

 

REDEFINITION OF ADMINISTRATIVE PENALTIES IMPOSED BEFORE EFFECTIVE DATE

  1. FTA shall define the administrative penalties imposed on the Registrant prior to the effective date hereof that have not been paid, so that they are equal to 30% of the total unpaid penalties if all of the following conditions are met:
  • Any of the administrative penalties stipulated in Cabinet Resolution No. (40) of 2017 referred to above was imposed on the Registrant prior to the effective date hereof and has not been fully paid;
  • The Registrant has paid the following:

1) The due and payable tax, up to 31 December 2021 at most; and

2) 30% of the total payable administrative penalties unpaid until the effective date hereof up to 31 December 2021 at most.

  1. FTA shall determine the procedures for implementing the provisions of this Article.