Fines for tax violations in the UAE

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All firms registered in the UAE must maintain accounting records, properly filing all documents related to taxes, submit tax returns to the UAE Tax Service on time and pay taxes on time.

Since 2018, the UAE introduced a value-added tax (VAT) and when maintaining accounting, it is necessary to adhere to strict requirements for accounting for this tax.

In addition, under certain conditions the company must register as a VAT payer, and this applies to both: local companies and companies from free zones.

For violations in the conduct of accounting, for late filing of tax returns and for late payment of taxes, companies will have fines. Moreover, if the tax is not paid in time, the fine can be charged at a rate of 1% of the amount due for each day of delay. With a large tax evasion, it is possible to initiate a criminal case and imprisonment.

All firms that conduct business in the Emirates are required to maintain accounting records, which include accounting documents, commercial books, filling in and storing all necessary documents.

It is also necessary to file a tax return for each tax period to the Tax Service of the UAE.

On the basis of a tax return or on the basis of a tax assessment, the tax must be paid within the timeframe established by law.

If the filed tax return does not contain any information specified by law, the declaration will not be accepted!

Each company is responsible for the completeness and accuracy of the information provided in the tax declaration and in correspondence with the tax authorities.

A firm that is registered as a VAT payer must maintain documentation of all the goods and services it provides. Such records should include the goods and services themselves, as well as suppliers and their agents, and these records must contain information sufficient for the Tax Service to be able to identify these goods and services or suppliers and their agents. These documents must be kept for 5 years after the end of the tax period to which they relate, and documents related to real estate must be stored for 15 years. The tax declaration is submitted on a monthly or quarterly basis, and the Tax Service must receive the declaration no later than 28 days after the end of the tax period.

For violations of rules of conducting accounting, untimely submission of tax declarations and untimely payment of taxes various penalties are provided.

If the violation is related to tax evasion, then punishment is possible not only in the form of a fine, but also in the form of imprisonment.

Note that paying fines does not eliminate the need to pay the tax itself.

If the accounting rules are violated in the UAE for the first violation, a fine of 10,000 dirhams (2,740 USD) may be imposed, and a further violation of 20,000 dirhams (5,550 USD).

If the firm does not file a tax return within the statutory deadlines, the first violation may be fined 1,000 dirhams (273 USD), and a further violation of 2,000 dirhams (545 USD).

If the company does not pay the tax specified in the tax return or in the tax assessment on which the company was notified within the prescribed period, the following penalties are imposed for the delay:

2% of the amount of unpaid tax immediately after the occurrence of the delay;
4% of the amount of unpaid tax on the seventh day of delay;
daily 1% of the amount of unpaid tax after the expiry of one month of delay, up to a maximum amount of 300%.