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UAE unveils fines, fees for tax law violations

Waheed Abbas/Dubai
Filed on October 2, 2017 | Last updated on October 2, 2017 at 09.13 pm
UAE unveils fines, fees for tax law violations

The penalties range from as low as Dh3,000 and go up to Dh50,000 depending on the offences committed by the entities or individuals.

The UAE on Monday announced services fees and fines for non-compliance of value-added tax (VAT) laws as the country heads towards implementation of the consumer-focused taxation system from January 2018.

The regulations covers individuals, companies, tax agents and their legal representatives who come under the gambit of this new VAT regulations. The penalties range from as low as Dh3,000 and go up to Dh50,000 depending on the offences committed by the entities or individuals.

As per the new regulations, if the person fails to keep required records and other information specified in the laws will be fined Dh10,000 in the first instance and Dh50,000 in case of repetition.

The law further states that if the person fails to submit data, records and documents related to tax in Arabic to authority when requested, he would be penalised Dh20,000.

The UAE will implement 5 per cent VAT - which is one of the lowest in the world - from next year on a host of goods and services as part of the GCC-wide agreement. As per the UAE regulations, companies that provide goods and services with annual turnover of Dh375,000 or higher will be subject to VAT. While businesses with taxable supplies below Dh375,000 and above Dh187,500 will have the option to register. The UAE aims to raise Dh12 billion through VAT collections in the first year and Dh20 billion in the second year. Analysts and economist believe that the VAT will increase inflationary pressure in the country.

As part of the GCC deal, Saudi Arabia will also join the UAE from January 2018 while other Gulf nations will jump into the bandwagon at a later stage.

A press statement issued on Monday said the UAE Council of Ministers adopted Cabinet Decision No. 39 of 2017 on fees for services provided by the Federal Tax Authority and Cabinet Resolution No. 40 of 2017 on penalties for violations of tax laws in the UAE.

"These decisions bring an added layer of transparency to the Authority's relationship with its customers," said Sheikh Hamdan bin Rashid Al Maktoum, Deputy Ruler of Dubai and UAE Minister of Finance. "This, in turn, provides extra incentive for stakeholders and all concerned parties to abide by tax regulations."

"All customers can refer to the official Directory of Services Fees to know what is required of them to be in compliance with tax procedures," Sheikh Hamdan bin Rashid explained.

Thomas Vanhee, founding partner, Aurifer Middle East Tax, said: "After having opened the possibility to VAT register in the UAE and after the introduction of excise taxes on October 1, 2017, the UAE government has now decided on the applicable fees and penalties for non-compliance with the VAT and excise tax legislation. This complements the Federal Tax Procedures Law and its Executive Regulations. These laws already give much power to the UAE's Federal Tax Authority. The considerably high penalties applicable will now additionally give the FTA an important instrument to deter taxpayers from non-compliance."

Vanhee elaborated that the penalty framework is very strict.

"This can be explained by the fact that the same penalties apply to excise tax and VAT. In mature jurisdictions penalties on excise goods, such as tobacco, are also high, since they are very fraud sensitive goods. Penalties for VAT offences though are usually lower and provide for a framework in which voluntary disclosures are encouraged by automatically waiving penalties for tax payers coming forward," Vanhee added.

The fine for not registering is Dh20,000, which is double the fine applicable in Saudi Arabia, he said, adding that if the tax payer does not pay his taxes due, after one month a daily penalty applies of one per cent. In the oldest jurisdictions in the EU which have implemented VAT and have a relatively limited VAT gap, the late payment penalties usually vary between 0.4 and one per cent per month - with exceptions up to 2.75 per cent. In case of an error in the voluntary disclosure by the person/taxpayer, it will result in Dh3,000 fine for the first time and Dh5,000 in case of repetition.

But in case of failure of the taxable person to voluntary disclose errors in the taxable returns will also incur a fine of Dh3,000 for the first and Dh5,000 for repetition.

According to Federal Tax Authority, tax registration service and issuance of e-tax registration certificate will be free of charge but an attestation will incur a fee of Dh500. However, tax agents will have to pay Dh3,000 fee for registration and renewal for three years.

According to FTA, registration and renewal fee for an accounting software provider will be Dh10,000 for one year, whereas registering a Designated Zone will cost Dh2,000 per year.

However, there will be no service fee for registering a warehouse keeper or issuing an electronic warehouse keeper registration certificate. But an official printed certificate will cost Dh500.

Directory of Federal Tax Authority's Service Fees 

#

Description of Service

Fee (Dirhams)

1

Issuing of an attested paper tax registration certificate.

(500) for each certificate

2

Listing of a Tax Agent in the Tax Agent Register.

(3,000) for three years

3

Renew Listing of a Tax Agent in the Tax Agent Register.

(3,000) for three years

4

Registration of Software provider with the Federal Tax Authority.

(10,000) for one year

5

Renew registration of Software provider with the Federal Tax Authority.

(10,000) for one year

6

Registration of Designated Zone, in accordance with the provisions of Federal Decree-Law No. (7) of 2017 on Excise Tax.

(2,000) for one year

7

Issuing of an attested paper Warehouse Keeper registration certificate

(500) for each certificate

 

 

Directory of violations and the Corresponding Administrative penalties

 

Violations and Administrative Penalties related to the Implementation of the Federal Law No. (7) of 2017 on Tax Procedures

Administrative Penalty (Dirhams)

Description of Violation

  • (10,000) for the first time.
  • (50,000) in case of repetition.

The failure of the person conducting Business to keep the required records and other information specified in Tax Procedures Law and the Tax Law

1

(20,000)

 

The failure of the person conducting Business to submit the data, records and documents related to Tax in Arabic to the Authority when requested.

2

(20,000)

The failure of the Taxable Person to submit a registration application within the timeframe specified in the Tax Law

3

(10,000)

 

The failure of the Registrant to submit a deregistration application within the timeframe specified in the Tax Law

4

  • (5,000) for the first time.
  • (15,000) in case of repetition

The failure of the Registrant to inform the Authority of any circumstance that requires the amendment of the information pertaining to his tax record kept by Authority.

5

(20,000)

 

The failure of the person appointed as a Legal Representative for the Taxable Person to inform the Authority of his appointment within the specified timeframe. The penalties will be due from the Legal Representative's own funds.

6

  • (1,000) for the first time.
  • (2,000) in case of repetition within (24) months.

The failure of the person appointed as a Legal Representative for the Taxable Person to file a Tax Return within the specified timeframe. The penalties will be due from the Legal Representative's own funds.

7

  • (1,000) for the first time.
  • (2,000) in case of repetition within (24) months.

The failure of the Registrant to submit the Tax Return within the timeframe specified in the Tax Law.

8

The Taxable Person shall be obligated to pay a late payment penalty consisting of:

-       (2%) of the unpaid tax is due immediately once the payment of Payable Tax is late;

-       (4%) is due on the seventh day following the deadline for payment, on the amount of tax which is still unpaid.

-       (1%) daily penalty charged on any amount that is still unpaid one calendar month following the deadline for payment with upper ceiling of (300%).

The failure of the Taxable Person to settle the Payable Tax stated in the submitted Tax Return or Tax Assessment he was notified of, within the timeframe specified in the Tax Law.

9

Two penalties are applied:

  1. Fixed penalty of:
  2. Percentage based penalty shall be applied on the amount unpaid to the Authority due to the error and resulting in a tax benefit as follows:
  • (3,000) for the first time.
  • (5,000) in case of repetition

-      (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 the 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.

The submittal of an incorrect Tax Return by the Registrant.

10

Two penalties are applied:

  1. Fixed penalty of:
  2. Percentage based penalty shall be applied on the amount unpaid to the Authority due to the error and resulting in a tax benefit as follows:
  • (3,000) for the first time.
  • (5,000) in case of repetition

-      (50%) if the Person/Taxpayer makes a voluntary disclosure after being notified of the tax audit and the Authority starting the tax audit or after being asked for information relating to the tax audit, whichever takes place first.

-      (30%) if the Person/Taxpayer makes the voluntary disclosure after being notified of the tax audit but before the start of the tax audit.

-      (5%) if the Person/Taxpayer makes voluntary disclosure before being notified of the tax audit by the Authority.

The Voluntary Disclosure by the Person/Taxpayer of errors in the Tax Return, Tax Assessment or Refund Application pursuant to Article 10 (1) and (2) of the Tax Procedures Law.

11

Two penalties are applied:

  1. Fixed penalty of:
  • (3,000) for the first time.
  • (5,000) in case of repetition
  1. (50%) of the amount unpaid to the Authority due to the error resulting in a tax benefit for the Person/Taxpayer.

The failure of the Taxable Person to voluntarily disclose errors in the Tax Return, Tax Assessment or Refund Application pursuant to Article 10 (1) and (2) of this the Tax Procedures Law before being notified that he will be subject to a Tax Audit.

12

(20,000)

 

The failure of the Person conducting Business to facilitate the work of the Tax Auditor in violation of the provisions of Article (21) of the Tax Procedures Law.

13

The Registrant shall be obligated to pay a late payment penalty consisting of:

-       (2%) of the unpaid tax is due immediately once the payment of Payable Tax is late;

-       (4%) is due on the seventh day following the deadline for payment, on the amount of tax which is still unpaid.

-       (1%) daily penalty charged on any amount that is still unpaid one calendar month following the deadline for payment with upper ceiling of (300%).

 

The failure of the Registrant to calculate Tax on behalf of another Person when the registered Taxable Person is obligated to do so under the Tax Law.

14

(50%) of unpaid or undeclared tax.

A Person not accounting for any tax that may be due on import of goods as required under the Tax Law.

15

 

Violations and Administrative Penalties related to the Implementation of the Federal Decree-Law No. (7) of 2017 on Excise Tax

Administrative Penalty (Dirhams)

Description of Violation

(15,000).

Failure by the Taxable Person to display prices inclusive of Tax.

The penalty shall be the higher of AED (50,000) or (50%) of the tax, if any, chargeable in respect of the goods as the result of the violation.

Failure to comply with the conditions and procedures related to transfer the Excise Goods from a Designated Zone to another Designated Zone, and the mechanism of processing and storing of such Excise Goods.

  • (50,000) for the first time.
  • (20,000) in case of repetition

Failure by the Taxable Person to provide the Authority with price lists for the Excise Goods produced, imported or sold thereby.

 

Violations and Administrative Penalties related to the Implementation of the Federal Decree-Law No. (8) of 2017 on Value Added Tax

Administrative Penalty (Dirhams)

Description of Violation

(15,000)

Failure by the Taxable Person to display prices inclusive of Tax.

(2,500)

Failure by the Taxable Person to notify the Authority of applying Tax based on the margin.

The penalty shall be the higher of AED (50,000) or (50%) of the tax, if any, chargeable in respect of the goods as the result of the violation.

Failure to comply with conditions and procedures related to keeping the Goods in a Designated Zone or moving them to another Designated Zone.

(5,000) for each tax invoice or alternative document.

Failure by the Taxable Person to issue the Tax invoice or an alternative document when making any supply.

(5,000) for each tax credit note or alternative document.

Failure by the Taxable Person to issue a Tax Credit Note or an alternative document

(5,000) for each incorrect 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

- waheedabbas@khaleejtimes.com





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