UAE VAT Penalties Guide 2024
Complete list of FTA penalties and how to avoid them.
Penalties Can Add Up Quickly
Late payment penalties can reach up to 300% of the unpaid tax. Staying compliant is always more cost-effective than paying penalties.
FTA Penalty Schedule
Current penalties as of 2024
Late VAT Registration
Failure to register within 30 days of exceeding the AED 375,000 threshold
Late VAT Return Filing
AED 1,000 for first offense, AED 2,000 for repeat within 24 months
Late Payment of VAT
2% immediately, +4% after 7 days, +1% daily after 1 month (max 300%)
Incorrect Tax Return
Fixed penalty of AED 1,000/3,000 plus 50% of tax difference
Failure to Issue Tax Invoice
For each tax invoice not issued to a customer
Failure to Keep Records
AED 10,000 first offense, AED 20,000 for repeat
Not Displaying Prices Inclusive of VAT
Retail prices must show VAT-inclusive amounts
Failure to Notify FTA of Changes
Changes to business details must be reported within 20 days
Failure to Submit Voluntary Disclosure
Required when errors exceed AED 10,000
Tax Evasion
Deliberate tax evasion plus potential criminal prosecution
Understanding Late Payment Penalties
Late payment penalties are the most severe and complex in the UAE VAT system. They compound over time:
Late Payment Penalty Calculation
Example Calculation
If you owe AED 100,000 in VAT and pay 60 days late:
- Day 1: 2% = AED 2,000
- Day 8: +4% = AED 4,000
- Days 31-60: 30 × 1% = AED 30,000
- Total penalty: AED 36,000 (36% of tax due)
How to Avoid VAT Penalties
1. Register on Time
Monitor your taxable supplies monthly. Register within 30 days of exceeding the AED 375,000 threshold to avoid the AED 10,000 late registration penalty.
2. File Returns Before the Deadline
Set reminders for the 28th of the month following your tax period. File early to avoid last-minute system issues.
3. Pay VAT on Time
Schedule automatic payments or set up reminders. Even one day late triggers the 2% penalty.
4. Maintain Accurate Records
Keep all invoices, receipts, and accounting records for at least 5 years. Use accounting software to track VAT automatically.
5. Issue Proper Tax Invoices
Ensure every B2B sale over AED 10,000 has a proper tax invoice with:
- Your TRN and business name
- Customer TRN (for B2B)
- Invoice date and sequential number
- Description of goods/services
- VAT amount clearly stated
6. File Voluntary Disclosures Proactively
If you discover an error over AED 10,000, file a Voluntary Disclosure immediately. Self-reported errors have lower penalties than those discovered during FTA audits.
What If You Receive a Penalty?
If the FTA issues a penalty, you can:
- Pay immediately: Avoid additional late payment penalties on the penalty itself
- Request reconsideration: Within 20 business days if you believe the penalty is incorrect
- Appeal to Tax Dispute Resolution Committee: If reconsideration is rejected
Best Practice
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