Learn how to avoid VAT penalties in the UAE with expert guidance from BMS Auditing. Ensure timely registration, accurate returns, and full FTA compliance.
The introduction of VAT in the UAE in 2018 was a turning point toward economic diversification, lessening the country's dependence on oil revenues. Since its launch, the UAE government has made several updates and clarifications to help businesses comply with the VAT rules issued by the Federal Tax Authority (FTA). All qualifying businesses are required to register for VAT, file returns on time, and make proper VAT payments as per UAE law.
Are You Familiar with the VAT Penalties in the UAE?
Failure to adhere to the FTA's regulations may result in hefty penalties. Working with an FTA-authorized tax agent such as BMS Auditing ensures that your company stays compliant and does not face avoidable penalties.
Let’s review the major VAT penalties in the UAE, their effects, and how to prevent them courtesy of our expert assistance.
Understanding VAT Penalties in the UAE
VAT is a 5% consumption tax levied on the majority of goods and services. FTA enforces compliance and levies penalties against businesses that don't comply with the law. Such fines are corrective, driving the right reporting and compliance with UAE tax law.
Key Tips to Prevent VAT Penalties
- Prompt VAT Registration
Traders with taxable supply or imports amounting to over AED 375,000 must register for VAT. Failure to do this on time (when turnover reaches the set threshold) can lead to a penalty of AED 10,000.
BMS Auditing ensures that you keep track of your revenues and handles the registration process in a timely manner.
- Keep Accurate Records
Accurate bookkeeping is important. Companies are required to keep financial records for a minimum of 5 years from the end of each tax period. These records underpin VAT return submissions and input tax claims.
The BMS Auditing team ensures that your records are FTA compliant for audits and reporting.
- Timely VAT Return Filing
VAT returns should be filed by the 28th of the next month after the tax period. Failure to meet deadlines may result in penalties—AED 1,000 for the first time and AED 2,000 for subsequent offenses.
With BMS Auditing, your VAT returns are prepared and filed correctly and on time.
- Issue Tax Invoices on Time
Companies have to send tax invoices within 14 days of the supply of goods or services. Otherwise, the penalty can be up to AED 2,500 for every invoice. Our VAT advisors implement proven software and best practices for timely and compliant invoicing.
- Remain Informed of UAE Tax Laws
Tax laws change regularly. It is crucial to stay up to date with FTA updates, bulletins, and clarifications. BMS Auditing keeps you updated and assists in making changes to ensure compliance.
- Educate Your Staff on VAT Compliance
Staff handling accounting or invoicing need to know VAT rules, such as zero-rated supplies, exemptions, and correct calculations. We provide training and support to equip your staff on VAT processes to minimize errors.
Common VAT Mistakes to Avoid
- Late Registration: Failing to register for VAT within the deadline set by the FTA can result in hefty penalties and compliance issues from the outset.
- Incomplete Data: Missing or inaccurate information in VAT returns or records can lead to errors, delays, and fines from the tax authorities.
- Using Wrong VAT Rates: Wrong classification of goods/services may result in the application of the wrong tax rate.
- Inaccurate Financial Data: Reducing VAT liability by underreporting sales or overstating expenses is tax evasion and is punished severely.
- Invalid Tax Invoices: Not inserting obligatory details or issuing erroneous invoices will attract fines. All tax invoices must adhere to FTA norms.
Why Choose BMS Auditing for VAT Compliance in the UAE?
BMS Auditing is a leading tax, audit, and advisory firm in the UAE. As a certified tax agency by the FTA, we assist companies to streamline tax processes and ensure complete compliance with UAE VAT legislation, evading penalties and maximizing tax planning.
Our expert support equips clients with current information and tools to be ahead of tax requirements.
Our Core VAT Services Are:
- VAT Registration
- VAT Return Filing
- VAT Deregistration
- VAT Audit Support
- VAT Health Check
- Ongoing VAT Compliance and Advisory
Stay Compliant. Stay Confident.
Call BMS Auditing today for professional guidance on UAE VAT compliance and protect your business from undue penalties and fines.
Enjoy comprehensive, stress free tax compliance with BMS Auditing. Call us today and engage some of the top tax experts in the GCC Region!
