In the United Arab Emirates or UAE, Value Added Tax (VAT) regime already settled in as business organizations gained a great understanding on the relatively new taxation system. But not all businesses are aware of VAT penalties which are simply at bay. Taxpayers, majority of them, also don’t know about the process of disputing VAT penalties in case an entity disagrees with UAE Federal Tax Authority (FTA).
In the event that a taxable person does not agree with the FTA’s decision for a penalty, the first thing to do is talk to a regulated tax agent in Dubai to help send a request for VAT reconsideration. For a penalty imposed by the FTA that is more than Dhs100,000, a taxable person has to appear before the Federal Court.
Most common reasons why FTA imposes VAT penalties
- Inability in filing tax returns in UAE on time;
- Grave errors in the tax return;
- Lack of records or failure to maintain VAT records;
- Intentional or unintentional ignoring of VAT laws and imposed penalties;
- Intentional or unintentional provision of wrong details to the FTA;
- Hiding information from the FTA;
- Inability in complying with relevant laws including tax evasion policies
It is advised to avoid potential errors or mistakes when complying with regulations pertaining to UAE VAT. For this purpose, all taxable persons in the UAE should avoid experimenting and choose only to acquire the guidance and assistance of reputable VAT specialists. This is to avoid further troubles and fines from the FTA. It is absolutely necessary as VAT obligations easily get complicated without expert guidance and proper understanding of the law.
Tax dispute filing prerequisites
There’s no denying the fact that VAT is imposed onto most businesses. It is a responsibility of taxpayers to focus on acquiring further knowledge on the subject, particularly the compliance process. When you are penalized for a violation and you want to appeal, consider the following steps:
- Gain full understanding on tax legislation in UAE, particular in handling of penalties and disputes;
- Submit an application for VAT reconsideration for a penalty claim;
- Submit an appeal only when your case involves a fine that is more than Dhs100,000
If you wish to move forward with your case of appealing to a VAT penalty, follow the process below.
Submit an application for VAT reconsideration
The taxable persons who disagree with the decision of the FTA should submit an application to reconsider a VAT penalty. A taxable person is required in taking a clear stance regarding the matter along with obligation to submit clear evidence or proof to justify a claim. Application submission duration is twenty business days from issuance of VAT penalty.
After submitting the reconsideration application for a VAT penalty, the authorities will be reviewing your request. You will be informed regarding the decision of the FTA. Take note: the tax authorities have the right in mitigating objections how they see fit.
Petition filing with the UAE Federal Court
It is important for you to remember that if a VAT penalty imposed on your business is less than Dhs100,000, FTA’s decision will be seen legally as binding to all concerned parties. For an amount that is equal or greater than Dhs100,000, a taxable person can move a case to the UAE Federal Court. But, a petition has to be filed twenty business days following the FTA’s issuance of a decision notice.
Relief taxable persons in UAE may get
If you’re thinking about outcomes of having a disagreement or getting into a dispute with the FTA, you will be happy to know that the tax authority provides relief to taxable persons. This can include the following:
- FTA can reduce or waive penalties in the event that they have received a justifiable claim and they’ve investigated the issue. If they’ve found a VAT penalty to be imposed unfairly, penalties may be disregarded.
- Tax authorities can postpone settlement of VAT penalties, depending on the cause of violation.
- Other reliefs may be given provided that a violation is corrected by a taxable person.
Regulated Tax Agents in Dubai
Managing VAT obligations can be a challenge to most businesses operating in the country. Even a single tiny mistake can lead to serious consequences for a business. Sometimes, a mistake can impact the personal lives of the business owners. There have been thousands of cases in the UAE wherein problems related to VAT have resulted in businesses being issued with an order to wind up. At VAT Registration UAE, we will help you in stopping the worst-case scenario from happening.
Our team of regulated tax agents in Dubai can provide expert advice and assistance. Being one of the leading VAT service providers in the country, we will help you deal with VAT investigations, penalties, and assessments with the FTA. Call today for a consultation with seasoned VAT Consultants in UAE!