Businesses In UAE Urged To Conduct Pre-Audit Checks Of VAT Returns For Expected Tax Audits This Year
Hefty penalties to be slapped on tax violators in UAE, warns Al Dhaheri Jones and Clark
Al Dhaheri Jones and Clark (ADJC) reminded companies anew of properly filing their value added tax (VAT) returns in anticipation of a possible tax audits by the Federal Tax Authority (FTA) this year. The Dubai-based consultancy firm, which is a registered tax agent in the UAE as approved by the FTA, warned that hefty penalties await tax violators in pursuant of Cabinet Resolution No. (40) of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE.
Since the implementation of VAT in the UAE at the start of 2018, the number of tax returns received from businesses registered for VAT purposes has exceeded 650,000 as per the report of the FTA. ADJC said it expects the FTA to begin conducting tax audits this year by scrutinizing VAT reported figures, which is likely to be at least 10 per cent of VAT returns submitted in 2018, in addition to returns which were subject to VAT refund requests.
Mohammed Fathy, General Manager of ADJC, said: “During the course of the expected tax audits, the FTA will issue tax audit notices to firms that have defaulted in filing their VAT returns, those with mismatched information, or those that have long pending VAT outstanding towards the FTA. We expect 65 per cent probability for this to occur in this current year. Therefore, businesses must prepare themselves by proactively performing pre-audit health checks and getting ready for VAT audits. Duly recognized experts or organizations can assist them in properly filing their VAT returns and conducting the pre-audit assessments to ensure proper compliance and, thus, avoid paying the fines.”
Tax violators face the risk of paying hefty administrative penalties to the government as per Cabinet Resolution No. (40) of 2017. In case of an error reported through voluntary disclosure by the person/taxpayer, it will result in Dh3,000 fine for the first time and Dh5,000 in case of repetition plus percentage-based penalty depending on the case.
But in case of failure of the taxable person to voluntary disclose errors in the taxable returns will also incur a fine of Dh3,000 for the first and Dh5,000 for repetition plus percentage-based penalty depending on the case.
For failure of a business to keep the required records and other information specified in Tax Procedures Law and the Tax Law, the company will pay AED 10,000 for the first offence and AED 50,000 for the repeat offence.
As per Article 26 of Tax Procedures Law, a prison sentence and monetary penalty not exceeding five times the amount of evaded tax, or either of the two, shall be imposed on a taxable person who deliberately fails to settle any payable tax or administrative penalties or an individual who understates the actual value of his business or fails to consolidate his related businesses with the intent of remaining below the required registration threshold.
The same severe penalties will be slapped on a person who charges and collects amounts from his clients claiming them to be tax without being registered as well as a person who deliberately provides false information and data and incorrect documents to the Authority, conceals or destroys documents or other material that he is required to keep and provide to the Authority; steals, misuses or causes the destruction of documents or other materials that are in the possession of the Authority and decreases the payable tax through tax evasion or conspiring to evade tax.
A person who prevents or hinders the Authority’s employees from performing their duties will be subject to similar punishments as well.
