Page 81 - Focus Group

BETTER SAFE THAN

SORRY – AVOID THE

PITFALLS OF THE VAT LAW

We agree that the VAT Law is a well-crafted REGISTRATION
legislation and has been implemented very
smoothly despite many challenges for implementing Registration is a critical area under the VAT Law.
taxation in a country where no tax regime existed. A Taxable Person needs to register within 30 days
of meeting the threshold limits. Failure to do so
However, there is a darker side to the Law and that will result in a huge penalty of AED 20,000. Some
is represented by the heavy penalties under the VAT common misconceptions leading to this penalty
Law. The penalties are heavy and in some cases are that companies having 100% exports and
compounding. MSMEs in particular who have not service providers in Designated Zone do not need
taken professional advice have found themselves to register. In these cases, typically companies
at the receiving end of some very unpleasant dues. have not only been levied the 20k fine, but when
registering late, they have been given retrospective
Let us take a look at these penalties based on the registration and hence were immediately liable for
life cycle of VAT as below:
penalties on late returns filing as well as penalties
Registration --------- VAT Returns ------Records on the unpaid VAT amounts. In some cases, these
Maintenance------- Deregistration cascading penalties have resulted in huge dues
right at the start of the VAT Registration.
Returns
Filing VAT RETURNS AND AMENDMENTS

Registr Records There are several high-risk areas:
ation mainten • Late filing of VAT Returns – AED 1,000 or AED
ance
2,000 as the case may be
Deregis
tration • Late payment of VAT – 6% for the first month

The Institute of Chartered Accountants of India (Dubai) Chapter NPIO TAX JOURNAL 2020 81