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Why new UAE penalties for underpaying VAT should be a wake-up call

Vatglobal’s smart VAT compliance technology automatically error-checks your supporting documentation and eliminates the human error that’s all but inevitable in manual VAT processing. It’s not just more efficient. As the UAE’s new VAT penalties demonstrate, errors on your VAT submission can prove extremely costly.

Reduced VAT penalties, if you comply with the conditions

The UAE has reduced the penalties for failing to meet VAT requirements. However, there’s an important caveat. The reduced penalties depend on taxpayers volunteering information about late or erroneous VAT payments. The new penalty system aims to encourage taxpayers to disclose VAT violations. 

In terms of the new rules, both the fixed penalties for VAT violations, and late payment penalties, have been lowered if you voluntarily disclose your noncompliance. 

The new rules offer UAE businesses an excellent opportunity to disclose underpayments of VAT and avoid severe penalties.   

UAE’s carrot-and-stick VAT approach  

At the same time, however, the penalty for companies that fail to disclose previous violations has increased. 

Previously, any company that settled underpaid VAT after being notified of an audit was subject to a fine of 30% of the underpaid VAT. 

Now, if you are notified that you are subject to audit, you are liable 50% of the underpaid VAT and an additional penalty of 4% of the underpaid VAT per month from the date at which the VAT return was due. 

The UAE’s carrot-and-stick approach is a strong incentive for companies to disclose any underpayments and avoid the risk of extremely costly audits. 

That’s all well and good for companies that are aware of their underpayments. But what if you simply made an error on your VAT returns and are not aware of it?

The cost of an error

Unfortunately, if an audit reveals that a business has underpaid VAT then serious penalties may apply. Even if noncompliance is accidental.

In other words, businesses simply cannot afford the risk of making erroneous VAT claims. After all, part of the obligation of being VAT registered is that you take reasonable efforts to ensure you file regular, comprehensive and accurate VAT returns. 

Eliminate mistakes, ensure 100% VAT compliance

Don’t risk potentially ruinous errors. Vatglobal’s proprietary VAT compliance software ensures your business is always 100% VAT compliant, everywhere you have an obligation. Our technology applies automatic checks to ensure reports are accurate. The technology manages workflow more effectively and ensures all deadlines are met. It’s a seamless way to manage compliance and avoid penalties. 


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