Excise Tax Penalties: Avoiding Costly Mistakes in UAE

Excise tax laws in the UAE set hard and fast regulations for businesses to follow. Compliance with these regulations is a prerequisite for businesses, as noncompliance can lead to hefty penalties. Excise tax penalties in the UAE are imposed under Federal Decree-Law No. 7 of 2017 on Excise Tax, with specific violations and fines listed under Cabinet Decision No. 49 of 2021 on violation of tax laws. Businesses must be aware of different violations and relevant penalties so that they can do their best to avoid them.

Tax Gian aims to help your business comply with tax regulations in the UAE and avoid heavy penalties. Noncompliance can not only attract penalties but can also damage your reputation in the market. Tax Gian is here with top strategies for compliance and ultimate business success. You can also seek expert guidance from our tax consultants at Tax Gian.

Following is a list of violations and relevant excise tax penalties in UAE for businesses to be mindful of;

     1.  Failure to Maintain Accurate accounting records

All business organisations shall maintain complete and accurate accounting records.

• Penalty: AED 10,000 for the first offence and more on every subsequent offence up to a maximum of AED 20,000
• How to Avoid:: Always design a proper record-keeping practice and an annual audit so that you remain compliant.

2. Failure in Mandatory Timely Tax Registration or Deregistration

Failure to timely register or deregister for excise tax is a very common mistake businesses do.

• Late Registration Penalty: AED 10,000.
• Late Deregistration Penalty: AED 1,000 per month, up to AED 10,000.
• How to Avoid:: Be vigilant and keep track of deadlines while taking prompt action to avoid unnecessary penalties.

3. Late Submission of Tax Returns

Tax returns are to be filed within the time frame as applicable.

• Penalty: AED 1,000 for the first violation, and goes up to AED 2,000 for each repetition that falls within the 24-month period.
• How to Avoid:: You can automate the tax filing process so you are always in compliance.

4. Tax Returns or Forms Completed in Error

Every time you submit or file incorrect returns, it certainly gives rise to serious penalties.

• Fixed Penalty: AED 1,000 for the first offence, and subsequently up to AED 2,000 on offence repetition.
• Additional Penalty: In case the errors cause tax differences, penalties will be equal to the amount of tax difference or at least AED 500.

5. Late Tax Payment

Delays in settling payable taxes attract escalating fines.

• Penalty:
  • 2% of the unpaid tax for the first day after the due date.
  • 4% monthly thereafter, up to 300% of the unpaid amount.
• How to Avoid:: Set reminders and allocate funds to ensure timely payments.

6. Voluntary Disclosures and Errors

If a business identifies errors in its tax return, it must submit a voluntary disclosure promptly.

• Penalty:
  • 5% of the difference if disclosed within the first year.
  • Up to 40% for disclosures made after four years.
  • 50% of the error amount if not disclosed before a tax audit.
• How to Avoid:: Regularly review records to catch errors early and report them immediately.

7. Non-Compliance with Excise Tax Rules

Other violations include failure to display tax-inclusive prices or provide excise goods’ price lists.

• Penalty:
  • AED 5,000 for the first offence, doubling for repeated violations.
  • 50% of unpaid or undeclared tax for serious breaches.
• How to Avoid:: Stay updated on excise tax guidelines and implement compliance checks.

Other Common Administrative Excise Tax Violations and Fines

The UAE government has set forth various administrative penalties that companies need to be aware of:

1. Displaying Prices Without Tax
   • Fine: AED 5,000
   • Higher Penalty: If applicable, a penalty of AED 50,000 or 50% of the tax on the goods will be applied for repeated violations.
2. Transferring Excise Goods Without Compliance
   • Initial Fine: AED 5,000 for the first offence.
   • Increased Fine for Repetition: AED 10,000 for repeated violations.
3. Failure to Provide Price Lists of Excise Goods
   • Taxable entities must provide the Federal Tax Authority (FTA) with up-to-date price lists of excise goods they produce, import, or sell. Failure to do so could lead to penalties, emphasizing the importance of accurate record-keeping.

Practical Steps to Avoid Excise Tax Penalties

1. Maintain Accurate Records
   Ensure all business records, including invoices and tax filings, are accurate and complete. Use reliable accounting software to manage these efficiently.
2. Submit Tax Documents on Time
   Always submit tax returns, registrations, and updates before the deadlines. Mark key dates on a calendar and set reminders to avoid missing them.
3. Train Your Staff
   Provide training to employees responsible for tax compliance. They should be familiar with the UAE’s tax laws and procedures.
4. Hire Tax Professionals

Consider hiring expert tax consultants like Tax Gian to manage filings and resolve complex issues. They can also conduct regular audits to identify gaps.

1. Regularly Review Tax Laws
   One should keep themselves updated about the recent FTA publications and related cabinet decisions; otherwise, they will be in violation of their latest rules.

Why Choose Tax Gian for Ultimate Tax Compliance in UAE?

Hiring the best tax consultants like Tax Gian is the best way to avoid penalties and remain compliant with tax laws in UAE. It is the strategic solution for businesses to stay perfectly aligned and financially healthy without falling victim to costly miscalculations and errors. Tax Gian helps you in being proactive, maintaining precise records, and stay away from serious violations.