How to Apply for a VAT Penalty Waiver in the UAE: 2024 Update

The United Arab Emirates introduced Value Added Tax (VAT) in 2018 to benefit its commercial landscape and establish a structured approach to tax compliance. However, compliance errors can sometimes lead to administrative penalties for businesses. Therefore, the Federal Tax Authority (FTA) offers a VAT penalty waiver UAE as a means of reparation for companies with acceptable reasons for non-compliance, thereby allowing them to reduce their penalty burden and focus on business growth.

In this guide, we will share some insights into the VAT penalty waiver UAE, its benefits, eligibility criteria, and the application procedure. Professional tax consultants at Shuraa Tax will assist in navigating this process.

VAT penalty waiver UAE

The VAT Penalty Waiver is an initiative launched by the Federal Tax Authority (FTA) in the UAE that allows businesses to appeal a reduction or exemption from penalties incurred for VAT non-compliance.

This scheme is introduced to lessen financial pressure on businesses and encourage a proactive approach to compliance and economic stability. Through this initiative, the government emphasizes its commitment to promoting a supportive and business-friendly environment in the UAE.

Benefits of VAT penalty waiver UAE

Here are some key benefits of VAT penalty waivers in the UAE –

• Financial relief: VAT penalty waiver UAE liberates businesses from substantial financial liabilities by reducing or eliminating administrative penalties and alleviating compliance-related expenses.
• Opportunity for rectification: Through the penalty waiver facility, companies can rectify their compliance issues and adhere to VAT regulations better in the future.
• Reinforced business continuity: Reduced penalties facilitate business continuity by enabling companies to focus their resources on growth instead of allocating funds for financial liabilities.

Eligibility for VAT penalty waiver UAE

The FTA has specified specific eligibility criteria for businesses to qualify for the VAT penalty waiver in the UAE. This includes:-

• Valid reason for non-compliance – Businesses are required to provide a valid reason for non-compliance. The acceptable reasons for requesting a VAT penalty waiver are unintentional errors or circumstances that lead to non-compliance.
• Prompt rectification – Businesses seeking VAT penalty waivers must address and sort out compliance issues quickly to prove their commitment to VAT compliance in the UAE.
• Cooperation with the FTA – The applicant’s cooperation with the FTA during the review process is also considered a part of the eligibility criteria.

VAT penalty waiver application procedure

We have curated a detailed guide with all the essential steps to help you apply for the VAT penalty waiver UAE –

Submission of application – Companies are required to submit their application to the FTA with the necessary documents and a detailed explanation of the reason for non-compliance.

Meeting deadlines – According to the FTA guidelines, waiver applications need to be submitted within 40 business days. Therefore, businesses must ensure timely filing of applications to avoid additional penalties.

Supporting documentation – The relevant documentation included in the application are invoices, signed declarations, and financial records to prove the reason for non-compliance.

Consistent communication – Most importantly, the applicant must ensure to maintain clear and open communication with the authorities throughout the review process.

Essential criteria and waiver option:-

• Businesses can apply through an authorized tax advisor, registered tax agent, or legal representative.
• Companies that meet specific conditions and have no ongoing disputes with the FTA can apply for installment payments.
• Businesses that meet specific criteria, such as major challenges affecting compliance (illness, death, or systemic errors) can request a penalty reduction or exemption.

VAT Penalty Waiver Timeline

The Federal Tax Authority has established an organized timeline for processing VAT penalty waivers in the UAE:

• Review of application: The applicants are required to file their waiver request within 40 working days of the conclusion of the non-compliance event.
• FTA’s decision: The FTA will review the application and accordingly issue a decision within 20 working days.
• Notification to taxpayers: FTA then notifies the company of its decision within 10 days of issuance. If the applicant receives no notification, it means that the waiver request has been denied by the authorities.

Additional methods to apply for VAT penalty waiver in the UAE

Below listed are some additional mechanisms through which you can apply for a VAT penalty waiver:-

VAT reconsideration submission – If businesses succeed in providing justifiable reasons, they can appeal penalty relief if they believe it was applied by mistake.

Request to Tax Dispute Resolution Committee (TDRC) – If FTA rejects the applicant’s request, then they can appeal to the Tax Dispute Resolution Committee (TDRC) within 20 days of the FTA’s decision.

Application for Reduction or Exemption – Cabinet Decision No. 51 of 2021 allows companies to request penalty reductions or exemptions if they meet specific conditions.

VAT penalty reconsideration in Dubai

VAT penalty reconsideration helps businesses and individuals to challenge VAT penalties imposed by the FTA. This aspect benefits those who believe that the imposition of the penalty was an error or due to administrative mistakes or unexpected delays.

Applying for VAT penalty reconsideration in Dubai requires applicants to submit a reconsideration form along with evidence and a detailed explanation of their case that clarifies the cause of the error. Hence, to structure a convincing argument and ensure compliance with FTA requirements, companies often rely on VAT penalty reconsideration services to improve their chances of success. These services help companies understand FTA standards and requirements and accordingly present accurate documentation in order to make the VAT reconsideration process smoother.

VAT Reconsideration services in the UAE

Seeking VAT consideration services in Dubai can help businesses in the following ways:-

• Expert Guidance: Tax consultants have deep knowledge of UAE tax laws which help applicants understand the requirements of the FTA and undergo the reconsideration process seamlessly.
• Document preparation: Professionals of Shuraa TAX assist businesses in gathering documents that support their claims for VAT penalty waiver UAE, such as proof of payment, compliance records, etc.
• Detailed explanation: VAT consideration services offered by Shuraa Tax comprise the preparation of clear, concise explanations that explain the reasons for reconsideration and present a strong case for a penalty waiver or reduction.
• Timely submission: Shuraa experts make sure that the requests for reconsideration are submitted within the specified deadline to avoid rejections from the FTA.
• Compliance with FTA standards: VAT reconsideration services adhere to the FTA guidelines which help increase the chances of success in applications and reduce the risk of repeated penalties.

Shuraa Tax services can help companies save their valuable time and effort while significantly improving their chances of attaining positive results in VAT penalty reconsideration in Dubai.

Seek professional assistance for VAT Penalty Waiver UAE

VAT penalty waiver is a significant tool for businesses looking for compliance correction opportunities. It not only helps reduce financial liabilities but also offers a second chance for compliance and business continuity. By introducing the VAT penalty waiver program, the UAE demonstrates its dedication to a supportive and strong business ecosystem.

So, whether you are a new business or an established venture, understanding VAT penalty waivers can help maintain compliance and focus on business growth. However, navigating the VAT procedures can be often challenging for companies which is why they seek expert help. The tax professionals of Shuraa Tax Consultants and Accountants hold extensive knowledge of the UAE’s tax system using which they assist companies with the VAT penalty waiver application and help resolve compliance issues.

For assistance with VAT penalty waiver UAE or more information on VAT reconsideration services, contact Shuraa Tax [email protected]