The Council of Ministers adopted new fines and penalty fees for non-compliance with Value Added Tax (VAT) Law on October 2, 2017. These fines are imposed on businesses that don’t follow the new rules.

Penalties for failing to follow to tax laws range from 1,000 dirhams to 50,000 dirhams, however other violations will incur a penalty of 50% of the unpaid tax. For a first offense in failing to keep the required records and other information listed in Tax Procedures Law, a fine of 10,000 dirhams ($2,722) will be charged and 50,000 dirhams for subsequent offenses. Failure to register on time will hit a lot of businesses.

Late payment penalties will increase from 2% to 4% after seven days of deadline. Also, 1% daily penalty up to a limit of 300% will be charged on tax still unpaid one month after the deadline.

Lawyers who ignore their client’s tax affairs will have to face different penalties to be paid from the Legal Representative’s own funds. Failure to notify the authority about their appointment within the particular time frame will be charged 20,000 dirhams. They will be fined 1,000 dirhams for the first offense of failing to file a client’s tax return, and 2,000 dirhams if the offense is repeated within 24 months.

Tax registration through online: http://www.tax.gov.ae/ and an electronic tax registration certificate are free of costs. Fees range from 500 dirhams for the issue of an attested paper tax registration certificate to 10,000 dirhams for the annual registration of a software provider with the Federal Tax Authority.

The UAE and Saudi Arabia are taking preparation to implement VAT on January 1, 2018. Last year, the Gulf Cooperation Council, an economic alliance of Saudi Arabia, UAE, Bahrain, Oman, Qatar, and Kuwait, agreed to introduce 5% VAT rate by January 1, 2019.