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penalty for non payment of vat in uae

When we talk about penalty for non payment of vat in uae, we should talk about VAT first.

VAT is a value-added tax that is charged on most goods and services sold in the UAE. Businesses that are registered for VAT are required to collect VAT from their customers and remit it to the government. If a business fails to pay VAT, they may be subject to a penalty.

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penalty for non payment of vat in uae And Types of Penalties

The UAE’s Federal Tax Authority (FTA) has strict penalties for businesses that fail to pay VAT. These penalties can include:

  • A fine of up to AED 50,000 for each month that VAT is not paid.
  • A criminal conviction, which can result in imprisonment of up to two years.
  • The suspension or cancellation of the business’s VAT registration.

The FTA also has the power to seize assets from businesses that fail to pay VAT. This includes:

  • cash.
  • property.
  • vehicles.

Businesses that are struggling to pay VAT can apply for a payment plan with the FTA.

However, this is not guaranteed, and businesses that default on their payment plan will be subject to the full penalties.

Amount of Penalties

The amount of the penalty will depend on the severity of the offense and the number of times the business has failed to pay VAT.

The amount of the late payment penalty is calculated as follows:

  •  2% of the unpaid VAT:
    Plus a daily penalty of 1% of the unpaid VAT, starting one month after the due date.
  • Up to a maximum penalty of 300% of the unpaid VAT:
    The amount of the failure to file penalty is fixed at AED 1,000 for the first offense and AED 2,000 for subsequent offenses.

How to Avoid Penalties

To avoid these penalties, businesses should ensure that they are correctly registering for VAT and that they are paying VAT on time.

They should also keep accurate records of their VAT transactions.  Here are some tips for businesses to avoid penalties for non-payment of VAT in the UAE:

  • Register for VAT as soon as you become liable to pay it.
  • accurate records of your VAT transactions.
  • Pay VAT on time.
  • If you are struggling to pay VAT, contact the FTA as soon as possible to discuss a payment plan.

By following these tips, businesses can help to ensure that they are compliant with UAE VAT regulations and avoid the risk of penalties.

FAQs about penalty for non payment of vat in uae

• 1,000 for the first offense and AED.
• 2,000 for subsequent offenses.
2% of the unpaid VAT. In addition, there is a daily penalty of 1% of the unpaid VAT, starting one month after the due date. The maximum penalty for late payment is 300% of the unpaid VAT.

The penalties for non-payment of VAT in the UAE can be significant. Businesses that fail to pay VAT may be subject to a late payment penalty, a failure to file penalty, or both. To avoid these penalties, businesses should file VAT returns on time and pay VAT by the due date.

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