After almost three years of the implementation of the value-added tax, the United Arab Emirates has introduced few amendments in penalties. Value-added tax is a comparatively different type of tax, which seemed quite complicated too. Most of the business entities failed to comply with the tax regulations, which required the taxpayers to register for VAT and take care of all the process on their own.
Due to failure in tax registration, payment, and related process, the authorities were compelled to take strict action in the form of imposing penalties. The penalties were also kept high to motivate people to pay the taxes. Now, the business entities have gotten a little grasp of the situation and are trying their best to comply with the terms; the authorities have introduced few amendments in penalties to offer a little relief.
Keep scrolling down this article to explore a brief guide about amendments in VAT penalties in the United Arab Emirates.
Top 6 Points about VAT Penalties Amendments You Should Know
Penalties are usually meant to make people fear the repercussions of not complying with the law. The purpose of value-added tax penalties was the same as people have to pay fines and face other issues due to noncompliance with tax regulations. However, now people understand their responsibility, so the government is also trying to smoothen the path to progress by amending the penalties.
Here are some of the major points about VAT penalties amendments you should know to comply better with tax conditions.
1. Late Payment Penalties
The very forts point you should know about amendments in the value-added tax-related penalties is that of the late payment penalty. Previously, the taxpayers faced an increase of 1% daily in the tax amount in case of failure of payment; now, the penalty will be 4% on a monthly basis when the payment is late. Some organizations prefer to hire the best VAT consultancy in Dubai and let the experts take care of all such matters while they focus on their business growth.
2. Errors in Tax Returns Penalties
Filing for the tax returns and tax assessment is the responsibility of taxpayers. If they fail to comply with it, they are liable to pay fines to the authorities. This is another important point about amendments in VAT penalties that the taxpayers should know about. If they fail to voluntarily disclose errors in tax returns, the penalties will be applicable at a rate of 5% for the first year and 40% in case of disclosure after 4 years.
3. Reduction in Administrative Penalties
One of the most beneficial amendments in VAT penalties made by the authorities is related to the reduction in administrative penalties. The authorities have announced the amendment that all the taxpayers who have not yet paid the administrative penalties can pay only 30% of the original amount by the end of 2021. If they fail to comply with this, they will have to pay the whole amount later on.
4. Incorrect Documentation Penalties
Another key consideration in terms of amendments in VAT penalties is related to the penalties for incorrect documentation. If the taxpayers fail to provide incorrect documentation of electronic invoices and electronic tax credit notes, they will have to pay a penalty of 5000 AED for every incorrect document. So, make sure to provide correct tax documentation in order to avoid hefty penalties.
5. Penalties for Wrong Tax Information
Another important category that the taxpayer should be aware of in terms of amendments related to VAT penalties is about penalties for wrong tax information. If the taxpayers provide wrong tax information to the authorities, they are liable to pay a fixed tax penalty of 3000 AED for the first time and 5000 AED in case there is repetition in wrong tax information filing.
6. Penalties for Poor Tax Accounting on Imports
The last point about amendments in value-added tax penalties the business organization should know is related to poor tax accounting on imports. If the taxpayers fail to account for tax on the imported goods and services according to the conditions specified by the federal taxation authority, they are liable to pay 50% of undeclared tax. If you have any concerns or queries, you can hire professionals from the best VAT consultancy in Dubai and let them resolve or avoid penalties at all and ensure smooth business progress.
Have the amendments in penalties confused you even more!
First of all, you must comply with all value-added tax regulations and requirements to avoid penalties at all costs. Even if you have failed to do so due to some issue, you can always consult experts for guidance and support. Get in touch with professionals to share your concerns and queries and ensure to resolve them on time to become a responsible taxpayer citizen.