In this video, we will discuss the penalty for late payment of VAT by the FTA in UAE.
Here you will learn –
1) When the VAT return must be filed and paid
2) How to calculate the penalty will be if there is a delay in payment
It is essential to make sure that you pay your VAT liability on time. However, there are situations, when your business might not be able to settle this liability on time. If this is the case then the business must know what is the implication of this, and at what rate the penalty will increase, as the delay increases.
As per the UAE VAT law, every VAT registered person has to mandatorily file their quarterly/ monthly return (as the case may be) and make the payment by the 28th day of the month following the return period, unless the 28th day falls on a Friday, Saturday or a National holiday, where it will be pushed to the next working day. The VAT liability needs to be fulfilled (VAT payment to Federal Tax Authority) by the 28th, which means the VAT amount should reach the FTA by the 28th.
The Registrant shall incur a late payment penalty as follows:
• 2% of the unpaid tax is due immediately once the payment is late.
• 4% of the amount of tax which is still unpaid is due on the seventh day following the deadline for payment.
• 1% daily penalty will be charged on any amount that is still unpaid one calendar month after the deadline for payment, up to a maximum of 300%.
For example, your VAT liability for your tax period is AED 10,000, and the business were not able to make the payment for 1 year the additional penalty for this tax payment is AED 30,000. A point to note is that the FTA allows for partial payment, therefore if the business was able to make a payment of AED 4,000 before the deadline. Then the VAT liability reduces to AED 6,000 and the penalty will be calculated on the new liability and can reach up to AED 18,000.
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We are one of the oldest audit firm based out of UAE, with over 30 years' experience. We are experts in Audit, Accounting, Taxation & Consultancy related services. Get in touch with us for more professional advice on your company's VAT compliance requirements in UAE.
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