Introduction:
Vat penalties in UAE: The word VAT is the abbreviation of “value added tax” which implies the products at different points of its manufacturing procedure. So basically, it is a type of tax that implies the business of people to balance the economy of the country.
What is VAT?
In simple words, VAT is a tax system that implies goods and services. For instance, raw material is prepared by a company and sold to the actual product-making organization. And this step is proceeded by “value added tax”. And the next step is in which the product manufacturing company sells their product to the brokers and then those brokers sell these products to the customers who are willing to use it.
Value-added tax is commonly expressed as the percentage of the total cost of $100 and the VAT on it will be 5%. So the consumer has to pay $105 to the merchants and the merchant gives 5% to the government and keeps the remaining amount. This method is applicable in almost all countries according to their rules and regulations. VAT is a tax system that implies equality for all businesses no matter what. Tax will be the same for all the business organizations even if its income is less.
Percentage of VAT on goods in UAE:
The percentage of VAT on the products is different in different countries. But in UAE the percentage of VAT is 5%.
Advantages of VAT:
It won’t be wrong to say that VAT is many times better than the so-called taxes. The most important fact about VAT is that it has a low impact on an individual’s economic decisions than an income tax. They are also considered an effective way to boost up GDP (gross domestic product) ratio.
Disadvantages of VAT:
There are some disadvantages of VAT as well. Unlike a progressive tax system that works in different countries like in America. VAT tax involves a flat tax system. A flat tax system means that all the business organizations have to pay the specific VAT even if their income is less, which is the biggest disadvantage of VAT.
Example of VAT:
A builder of metal utensils buys raw materials for the manufacturing of utensils from a dealer. The metal dealer is a seller at that point. The dealer charges the manufacturer 10% VAT and sends it to the government.
The manufacturer creates the utensils with raw material which it sells to the utensils manufacturing company with $2 plus 20% VAT. The manufacturer sends 10 percent to the government and keeps the other 10%.
Way of paying VAT in UAE:
In UAE vat can be paid via e dirham, credit card, bank transfer- local transfer-international transfer.
VAT penalties for late payment in UAE:
According to the UAE cabinet, strict penalties will be imposed in case of violation of VAT laws. Each penalty will not be less than 500 AED and no more than triple the value of the tax. Following are some of the penalties that will be imposed for the violation of VAT laws:
- If a business fails to keep the record specified by the VAT procedures or by tax law procedures then the business has to pay a penalty of 10,000 AED for the first time and 50,000 for each repeat violation.
- If a business fails to submit the records in Arabic when requested by the vat or by tax law procedures then the business will pay 20,000 AED.
- If a business fails to submit the registration application within the given time span then the business has to pay a penalty of 10,000 AED.- After meeting the Mandatory Threshold
- If a business fails to inform the authority of amendment of tax record that needs to be submitted then a business will pay penalty of 50,000 AED for the first time and 15,000 next time.
- If a business fails to submit a deregistration application within the given period of time then it has to pay 10,000 AED.
- If a business fails to notify the authority that legal representative has been chosen for the business within time frame then the price of 20,000 will be charged to the legal representative.
- If a legal representative fails to file a tax return within the specific time then the penalty of 1000 AED for the first time and 2000 in the second time.
- If a registrant fails to submit the tax return he will pay the penalty of 1000 AED.