VAT (Value Added Tax) was introduced in the UAE on January 1, 2018, to help the country reduce its dependence on oil revenue. With a 5% tax on most goods and services, VAT is something every business in the UAE needs to be aware of. For businesses that meet the required turnover, VAT registration in the UAE is mandatory. It also allows companies to reclaim VAT on their business expenses, which helps keep things running smoothly.
However, failing to register or follow VAT rules can lead to serious fines and penalties. That’s why it’s essential to understand the VAT registration fees in the UAE and what can happen if you’re not compliant. Here we’ll break down the fees for VAT registration in the UAE, the penalties for not following the rules, and how you can avoid them.
VAT Registration Thresholds in the UAE
The VAT registration threshold in the UAE is AED 375,000. This means that businesses with an annual turnover exceeding AED 375,000 are generally required to register for VAT.
The VAT registration thresholds in UAE are as follows:
1. Mandatory VAT Registration
Threshold: AED 375,000
Businesses and individuals with an annual taxable turnover exceeding AED 375,000 must register for VAT. This includes both the supply of taxable goods/services and imports.
2. Voluntary VAT Registration
Threshold: AED 187,500
Businesses with a turnover below AED 375,000 but exceeding AED 187,500 can choose to voluntarily register for VAT. This is beneficial for businesses that want to reclaim VAT on their expenses even if they are not required to register.
3. Zero VAT Registration
Businesses with an annual turnover below AED 187,500 are not required to register for VAT. However, they can still opt for voluntary registration if they wish to reclaim VAT on their inputs.
VAT Registration Fees in UAE
In the UAE, registering for VAT is free, but there’s a catch – if you want an attested registration certificate, you’ll need to pay around AED 250. And, of course, there are penalties if you don’t play by the tax rules.
Think of VAT registration as getting a business license – it’s mandatory for all traders and businesses involved in manufacturing or producing goods and services. The good news is that online VAT registration is quick and easy, and it’s becoming super popular among business entrepreneurs.
VAT registration can be overwhelming, especially for smaller businesses. That’s where the Shuraa Tax comes in! Our expert team provides affordable VAT registration services, handling the entire process from start to finish.
In addition to the basic registration fees, businesses may also be required to pay additional fees in certain circumstances. These may include:
- Group registration fees: If multiple businesses are part of a group, they may be required to pay a group registration fee.
- Late registration fees: Businesses that fail to register for VAT within the required timeframe may be subject to late registration fees.
It’s essential to note that VAT registration fees may change over time. Businesses should consult with Shuraa tax professionals or visit the UAE Federal Tax Authority’s website for the most up-to-date information on VAT registration fees.
VAT Penalties in the UAE
The Federal Tax Authority (FTA) in the UAE has established strict penalties for businesses that fail to comply with VAT regulations. These penalties are put in place to ensure that businesses meet their tax obligations.
Here’s a breakdown of the common VAT penalties in the UAE:
1. Failure to Register for VAT
- Penalty: AED 10,000
Businesses that are required to register but fail to do so within the specified time frame will face a hefty fine.
2. Late VAT Return Filing
- Initial Penalty: AED 1,000 for the first offense
- Repeat Offenses: AED 2,000 for subsequent late filings within 24 months
Filing VAT returns late can lead to these escalating fines if not addressed promptly.
3. Late VAT Payment
The following fines apply based on the delay in payment:
- 2% of the unpaid tax immediately after the due date
- 4% if the tax is not paid within 7 days
- 1% daily thereafter, up to a maximum of 300% of the unpaid tax
Delayed payments can quickly accumulate significant fines.
4. Submission of Incorrect VAT Returns
- Penalty: AED 1,000 for the first time and AED 2,000 in case of repetition.
Incorrect VAT returns, whether intentional or unintentional, attract penalties based on the amount of unpaid tax and the nature of the error.
5. Failure to Maintain Proper Records
- Penalty: AED 10,000 for the first offense and AED 20,000 for repeat offenses
Proper financial and VAT-related records must be maintained for at least five years. Failing to do so can lead to these substantial fines.
6. Failure to Display Prices Inclusive of VAT
- Penalty: AED 5,000
Businesses are required to display all prices inclusive of VAT. Failure to do so results in this penalty.
7. Failure to Issue VAT Invoices
- Penalty: AED 2,500 per invoice
Businesses must issue VAT-compliant invoices for every taxable transaction. Non-compliance can result in fines for each invoice not issued properly.
8. Other VAT Penalties
There are various additional penalties for violations such as tax evasion, providing incorrect information, or obstructing an audit by the FTA. These can range from financial fines to more serious legal consequences.
9. Consequences of Repeated Violations
Repeated offenses or willful non-compliance can result in more severe penalties, business suspensions, or legal action by the authorities.
It’s essential to note that these penalty amounts are subject to change. Additionally, the severity of the penalty may depend on the nature and extent of the non-compliance. Businesses that engage in repeated or deliberate non-compliance may face harsher penalties.
How to Avoid VAT Penalties?
Understanding and complying with VAT laws in the UAE is crucial to avoid penalties. Here are some key strategies to help businesses stay compliant:
1. Accurate Record Keeping
Maintain detailed records of all VAT-related transactions, including invoices, receipts, and payments. Use a reliable accounting system to track VAT input and output.
2. Timely VAT Returns
Submit VAT returns on time to avoid late submission penalties. Use a VAT compliance software to help you prepare and submit returns accurately.
3. Understanding VAT Laws
Stay updated on VAT laws and regulations through the UAE Federal Tax Authority’s website or by consulting with tax professionals such as Shuraa Tax.
4. Proper Invoice Issuance
Issue corrects and complete invoices for all goods and services sold. Include all necessary details on invoices, such as the date, invoice number, seller’s details, buyer’s details, description of goods or services, quantity, price, and VAT amount.
5. Effective Internal Controls
Implement strong internal controls to prevent errors and fraud. Regularly review and update internal controls to ensure they remain effective.
Shuraa Services for VAT Registration and Compliance
Shuraa Tax makes VAT registration and compliance in the UAE simple and hassle-free. With expert guidance, accurate VAT return filings, and ongoing compliance support, we ensure your business avoids costly penalties.
If you need help with VAT registration, maintaining records, or staying updated on the latest tax regulations, Shuraa’s team of professionals provides tailored solutions to meet your needs. Trust Shuraa to handle your VAT obligations so you can focus on growing your business confidently and compliantly.
Contact us today at +971508912062 or info@shuraatax.com, to learn more about how we can assist you.
