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Reduction of penalties leviable for VAT and Excise Non-Compliances

Mayank SahwneyMayank Sahwney    30 May 2021
Reduction of penalties leviable for VAT and Excise Non-Compliances

Decision 49 of 2021 was issued by the UAE Federal Government to reduce Penalties leviable for VAT and Excise Non-Compliances by the Federal Tax Authority amending the earlier Cabinet Decision 40 of 2017. 

The penalties relating to late payments of tax were reduced as below:-

  1. (2%) of the unpaid tax would be due on the day following the due date for payment.
  2. (4%) monthly tax penalty would be due after one month from the payment due date, and on the same date every month after that, on the amount of tax that is yet to be paid.
  3. There would be a cap of a maximum of 300% on the total late payment penalties.

Fixed penalties for the submission of Voluntary Disclosure (VD)  for incorrect VAT and Excise Returns is brought down to AED 1,000 for First VD and AED 2,000 for further VD's. There would be subsequent reductions or full waivers that would be permitted in specific cases.

  1. 5% if VD is submitted within 1 year of the due date of the tax return.
  2. 10% if VD is submitted between 1-2 years of the due date of tax return.
  3. 20% if VD is submitted between 2-3 years of the due date of the tax return.
  4. 30% if VD is submitted between 3-4 years of the due date of the tax return.
  5. 40% if VD is submitted after 4 years of the due date of the tax return. 

This decision of reduction of penalties leviable for VAT and Excise Non-Compliances proved to be a huge relief for all the businesses in UAE who have got unpaid VAT or Excise Tax Penalties levied by Federal Tax Authority under the old Cabinet Decision. This was made in order to support and supplement the businesses across UAE in these challenging times so that the businesses with unpaid VAT or Excise Tax penalties could take advantage of the special scheme.

Disclaimer: Content posted is for informational & knowledge sharing purposes only, and is not intended to be a substitute for professional advice related to tax, finance or accounting. The view/interpretation of the publisher is based on the available Law, guidelines and information. Each reader should take due professional care before you act after reading the contents of that article/post. No warranty whatsoever is made that any of the articles are accurate and is not intended to provide, and should not be relied on for tax or accounting advice.

You can access Law including Guidelines, Cabinet & FTA Decisions, Public Clarifications, Forms, Business Bulletins for all taxes (Vat, Excise, Customs, Corporate Tax, Transfer Pricing) for all GCC Countries in the Law Section of GCC FinTax

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