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VAT Late Payment Penalties in the UAE: FAQs

Value Added Tax (VAT) is a significant part of the taxation system in the United Arab Emirates, and businesses are required to comply with VAT payment, to which noncompliance accrues hefty fines. This article addresses distinct frequently asked questions (FAQs) regarding the UAE’s late payment penalties for VAT. Essentially, it is advisable for Taxable Persons to understand the regulations of the VAT system laid by the Federal Tax Authority, to effectively ensure compliance with the VAT law. 

FAQs on VAT Late payment penalties in the UAE

Some of the frequently asked questions related to VAT late payment penalties include the below:

  1. What are the late payment penalties for VAT in the UAE?

The following are the UAE’s late payment penalties for VAT

  • 2% of the outstanding tax is required timely.
  • 4% of the unpaid tax is due on the seventh day after the payment deadline.
  • Any unpaid sum after the payment deadline of one calendar month will be subject to a daily penalty of 1%, up to a maximum of 300%.

Read More: Required Documents for VAT Registration in UAE

A firm must pay AED 10,000 in VAT. The business needs to catch up on its VAT payments.

AED 200 (2% of AED 10,000) in late payment penalties will be assessed to the company on the first day of the grace period.

  1. When does a UAE VAT payment become past due?

In the UAE, a VAT payment is deemed overdue if it is not made by the deadline stipulated in the FTA. Businesses typically have 28 days starting at the end of the tax period to pay their VAT. A payment that is made after the due date is considered late. Any delay in making the payment results in penalties.

  1. How can I make VAT late payment fines?

Paying your VAT on time is the greatest way to avoid late payment penalties. You can pay the late VAT payments in one instance. However, you can apply for a penalty instalment plan with the Federal Tax Authority (FTA) if you cannot pay your VAT on time.

You must use the Emara Tax site to apply to the FTA to request a penalty instalment plan. The FTA will consider your financial condition and other criteria when deciding whether to accept your application.

  1. How to avoid VAT late payment fines?

VAT late payments can be avoided by keeping a proper accounting software system in place. They allow you to monitor and get reminders about the deadline and the due dates for the same. Thus, it smoothens and eases the process and also helps in avoiding last-minute rush for VAT payments in your business.

  1. What happens if I don’t pay my late payment penalty for VAT?

The FTA may take the following actions if you don’t pay your VAT late payment penalties:

Charge your interest on the fines that aren’t paid.

A tax assessment will be made against you.

Initiate legal proceedings against you, such as a lawsuit or the seizure of your property.

  1. How can I obtain assistance for late VAT payment fines?

You can seek help from the FTA if you need help paying your VAT late payment penalty. You might be eligible for a payment schedule or other help from the FTA. You can also approach approved VAT consultants in UAE for any assistance you might need to pay your VAT returns.

  1. In what situations might the FTA waive the penalties for late VAT payments?

In particular instances of genuine hardship or unusual circumstances, the FTA has the right to waive or minimize VAT late payment penalties. However, the FTA reserves the right to grant such waivers, and companies requesting them must do so with strong justification.

  1. What should I do in the UAE if I need to remember to pay my VAT?

Taking immediate action is crucial to make up for missed VAT payments. The first step is contacting the FTA and informing them of the missed payment. Have information concerning the delayed payment, such as the tax period and the amount involved, ready to share. You must also be prepared to pay any relevant interest and penalties along with the missed payment. Therefore, Taxable Persons are required to meet the deadlines set by the FTA for VAT payments.

  1. Does the UAE have any VAT payment exceptions or grace periods?

No, in the UAE, there are no exclusions or grace periods for paying VAT. Businesses must closely follow the timeframes for making payments. Penalties and interest charges may be imposed for failure to comply.

Seek the expert services of  Tax Consultant Dubai

Tax Consultant Dubai, a reputable Tax Consultant in UAE has a seasoned team of tax professionals. They guide Taxable Persons in registering businesses for VAT and ensuring compliance with VAT law. Further, they assist in maintaining your accounting and taxation systems in accordance with the FTA rules. Thus, contact us today and we shall be glad to assist you.

Mostafa is a qualified Corporate Tax Consultant with over 5 years of experience gained in diverse intricate tax matters, he has high expertise in conducting tax negotiations and investigations with the Federal Tax Authority and other external Tax Bodies. He has vast experience in reviewing and drafting tax documents. Mostafa has also advised on a plethora of tax matters, he draws much attention to tax filing procedures and to offering professional investigations to underlining tax complexities. Read more