VAT Penalties: A Complete List of Fines Under UAE Law

Introduction

Since the introduction of Value Added Tax (VAT) in the UAE, the Federal Tax Authority (FTA) has implemented a strict penalty regime to enforce compliance. Businesses failing to meet their VAT obligations may face significant administrative fines. Here, we break down the complete list of VAT penalties under UAE law and share tips to avoid them.

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🔍 Legal Basis

The penalties are governed by:

• Federal Decree-Law No. 8 of 2017 on VAT

• Cabinet Decision No. 40 of 2017 on Administrative Penalties

• Cabinet Decision No. 75 of 2023 (latest updates)

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✅ Common VAT Penalties in the UAE

Violation Administrative Penalty (AED)

Failure to register for VAT within the timeframe 10,000

Failure to submit VAT returns by the deadline 1,000 (first time), 2,000 (repeated within 24 months)

Failure to pay VAT on time 2% of unpaid tax (immediately), 4% monthly after 1st month (max 300%)

Failure to deregister within the prescribed time 1,000

Failure to display prices inclusive of VAT 5,000

Failure to keep proper records 10,000 (first time), 20,000 (repeated)

Failure to issue tax invoice/credit note 2,500 per document

Failure to comply with tax audit requirements 20,000

Incorrect tax invoice or credit note format 5,000 per document

Providing incorrect information in the tax return 1,000

Failure to notify the FTA of changes to business details (e.g., address) 5,000

Obstructing or preventing FTA officials from performing duties 20,000

Late voluntary disclosure (penalty varies by case) Min. 1,000 + 1% monthly based on delay

Not appointing a legal representative for tax (if required) 20,000

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⚠️ Important Note on Penalty Calculation

Some fines are fixed, while others are percentage-based, especially in case of late payments or under-declared VAT. The FTA also charges interest and monthly penalties for prolonged non-compliance.

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📌 Voluntary Disclosure Penalty Breakdown

If you discover an error in your VAT return, you must file a voluntary disclosure. Penalties include:

• AED 1,000 (first disclosure)

• AED 2,000 (subsequent disclosures)

• Additional percentage-based penalties depending on when the error is disclosed.

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🛡️ How to Avoid VAT Penalties

• 📅 File returns and make payments on time.

• 📂 Maintain accurate and complete records for 5 years.

• 🧾 Ensure invoices and credit notes meet FTA standards.

• 📤 File voluntary disclosures immediately upon discovering errors.

• 👨‍💼 Appoint a registered Tax Agent for expert guidance.

• 🧠 Train your staff regularly on VAT laws and compliance.

• 🔄 Keep the FTA updated on any business changes (e.g., address, contact info, activities).

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🚨 FTA Penalty Relief & Reconsideration

If you’ve received a penalty but believe it was unjustified, you can:

1. Submit a Penalty Reconsideration Request to the FTA.

2. Pay penalties and request Penalty Waiver Relief under special conditions.

Important: You must submit the request within 20 business days of being notified.

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✅ Conclusion

Ignoring VAT compliance in the UAE can be a costly mistake. With penalties reaching up to thousands of dirhams — or more — it's critical to maintain accurate records, file on time, and seek professional advice when in doubt. Proactive compliance is the best way to protect your business.

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💼 Need Help with VAT Compliance or Reconsideration?

At Sheikh Anwar Accounting & Auditing LLC, we assist businesses across the UAE with:

• VAT return filing

• Voluntary disclosures

• Tax audits and FTA penalty reconsiderations

📞 Contact us today to stay compliant and penalty-free.

📧 info@sa-auditors.com

🌐 www.sa-auditors.com