Top VAT Penalties That Must Be Avoided


The VAT is a consumption tax applied to consumer goods at every point of sale terminal. The fee is mostly levied as a percentage of total costs. For example, an item that costs $100 would be $115 after the addition of a 15% value-added tax.

The tax is not new for most western countries like the USA and the UK, and they are used to paying the GSTs and VAT on purchasing every product. However, the implication of VAT in the UAE isn’t that old. Middle-east levied VAT on goods on the 1st of January, 2018 and it’s only been two years.

Four violations and penalties of VAT laws in the UAE

The new upheaval and addition of tax certainly made everyone worried from buyers to suppliers, and they urgently started searching more about the proposal to practice compliance with VAT laws. Some efficient companies also headed towards Best VAT consultancy in Dubai to know about the process of VAT registration and to avoid the violation and penalties of VAT.

Here are the four most common violations that businesses often ignore and get penalized heavily in the Gulf countries of UAE.

Failing to keep the records specified by law

A company is bound to maintain all the financial records and commercial books to verify compliance with the VAT laws and governing bodies. Upon failing to provide all the specified documents, an organization is fined 10,000 AED for the first time and 50,000 after repetitive violations.

Not submitting the records in Arabic when required

Tax returns and all the documents and registrations must be submitted to the Federal Tax Authority in Arabic. Although, they may accept documents in a language other than Arabic only if a person provides a translated copy into Arabic at their expense and responsibility if requested.

However, failing to comply with the rule costs the company a fine of 2000 AED.

The legal representative failing to file a tax return

In case of legal representatives failing to file a tax return within the specified timeframe, a significant penalty amount is charged. Only the legal representatives are fined for the negligence. The fine amount ranges from 1000 AED for the first time and 2000 AED in case of repetition within two years(24 months).

Submission of false tax returns

Last but not least, another major violation related to the tax procedure is: failing to submit the correct tax returns. There is a percentage based penalty implied o the incorrect and unpaid amount paid to the taxation body.

There is a 50% fine if the registrant makes an unintentional disclosure or discloses returns by choice after getting notified about the tax audit. Moreover, there’s a penalty of 30% if the corrections are done before the governing body starts the tax audit process. The percentage of charge is 5% if the corrections are made before getting the notification of the tax audit by the Authority.

Want to avoid getting penalized on VAT violations?

Although it’s been two years that Dubai is following the suit of VAT laws, however many of the corporate firms still aren’t aware of it or ignoring the severity of VAT imposition. We are sure that the article above has compelled you to take all the AVT rules seriously and make sure that you’re complying with all the VAT rules to avoid any violations or legal actions.

Opt for the best VAT consultancy in Dubai, if you’re willing to sail through the process smoothly.


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