UAE VAT Update – The UAE reduces penalties on VAT and Excise Tax
On 28 April 2021, the UAE Cabinet of Ministers issued Decision No. 49/2021 reducing penalties on VAT and Excise Tax to help taxpayers during the COVID-19 pandemic.
The new provisions will be applicable 60 days as from April 28, 2021. As of this writing, the new procedures are yet to be detailed by the FTA; however, Khaleej Times has announced the following amendments:
Late payment penalties
As per the existing Cabinet Resolution No. 40/2017 on Administrative Penalties for Violations of Tax Laws in the UAE, the late payment penalties consisting of:
- 2% of the unpaid tax is due immediately once the payment of Payable Tax is late;
- 4% is due on the seventh day following the deadline for payment, on the amount of tax which is still unpaid; and
- 1% daily penalty charged on any amount that is still unpaid one calendar month following the deadline for payment with an upper ceiling of (300%).
Going forward, the late payment penalty will be reduced from 1% per day to 4% per month while a 300% cap will be retained.
In light of the new amendment, the amnesty program will grand up to a 30% reduction of the penalty amount provided the taxpayer settled penalties before December 31, 2021.
Voluntary Disclosure (“VD”) penalty
It is expected the VD penalties will also be revised, along with the technical procedures. The time limit for imposing the late payment penalties for the submission of the VD will be revised from the original VAT Return due date to 20 business days after the submission of the VD.
The above-expected changes will encourage taxpayers to disclose voluntarily the errors identified through the submission of the VD.
How can we help?
Rethink as an entity provides VAT advisory, optimization, registration, implementation, compliance, and training services in Bahrain, UAE, KSA, and the GCC.
Our team is here to guide you through the VAT law and regulations and ensure full compliance with the law. Based on our local and international experience, we understand that VAT is a complex tax and would certainly suffer numerous changes in the upcoming years. Rethink’s VAT services are aimed to suit both basic and complex returns for SMEs and larger enterprises.
Assistant Tax Manager