What is the penalty for errors in a VAT return?

5. 40% on the difference, where the Voluntary Disclosure is submitted after the fourth year from the due date of submission of the Tax Return, the Tax Assessment, or the relevant refund application. 12 The failure of the Person/Taxpayer to voluntarily disclose an error in the Tax Return, Tax Assessment, or refund application pursuant to Article 10 (1) and 10(2) of the Tax Procedures Law before being notified by the Authority that it will be subject to a Tax Audit. Without prejudice to the potential consequences of the penalty mentioned in Clause 10 of this Table, the person will be subject to: 1. A penalty of 50% on the amount of error. 2. A penalty of 4% for every month or part of the month, of the following: a. The unpaid Tax to the Authority, from the date the payment is due for the relevant Tax Period until the date of receipt of the Tax Assessment. b. The Tax that was not returned to the Authority due to ineligible refund, from the date of Tax refund until the date of receipt of the Tax Assessment. 13 The failure of the Person conducting 20,000 Business to facilitate the work of the Tax Auditor in violation of the provisions of Article 21 of the Tax Procedures Law. 14 The failure of the Registrant to 1. The Registrant shall be obliged to pay calculate Tax on behalf of another the penalty applicable to late Person where the Registrant settlement of Payable Tax up to a Taxable Person is obliged to do so maximum of 300%, pursuant to the under the Tax Law. following: a. 2% of the unpaid Tax is due on the day following the due date of payment, where the settlement of Payable Tax is late. Cabinet Decision No. 49 of 2021 - Issue Date: 28 April 2021 - Unofficial Translation 5

fixed penalty listed in Clause 1 of this penalty, a penalty equal to the that Tax difference of at least 500 shall be imposed. 3. Anyone correcting their Tax Return prior to the due date of payment shall be excluded from the penalty imposed under Clauses 1 and 2 of this penalty. 11 The submittal of a Voluntary Disclosure by the Person/Taxpayer on errors in the Tax Return, Tax Assessment or refund application pursuant to Article 10(1) and 10(2) of the Tax Procedures Law. Without prejudice to the potential consequences of the penalty mentioned in Clause 10 of this Table, a percentagebased penalty shall be applied on the difference between the Tax that was calculated and that which should have been calculated, pursuant to the following: 1. 5% on the difference, where the Voluntary Disclosure is submitted within one year from the due date of submission of the Tax Return, the Tax Assessment, or the relevant refund application; 2. 10% on the difference, where the Voluntary Disclosure is submitted within the second year following the due date of submission of the Tax Return, the Tax Assessment, or the relevant refund application; 3. 20% on the difference, where the Voluntary Disclosure is submitted within the third year following the due date of submission of the Tax Return, the Tax Assessment, or the relevant refund application; 4. 30% on the difference, where the Voluntary Disclosure is submitted within the fourth year from the due date of submission of the Tax Return, the Tax Assessment, or the relevant refund application; Cabinet Decision No. 49 of 2021 - Issue Date: 28 April 2021 - Unofficial Translation 4

voluntary disclose or a tax assessment, where the وذلك في حال قام الشخص بسداد الضريبة اإلضافية هذه قبل person has settled such due tax prior to the due date ) يوم عمل من تاريخ تقديم20( أي خالل،تاريخ استحقاقها of payment, i.e. 20 business days from the date of إال أنه بمجرد.التصريح الطوعي أو استالم التقييم الضريبي submitting a voluntary disclosure or receiving a tax سيتم فرض الغرامة كما،انقضاء الموعد المحدد لسداد الضريبة ّ assessment. However, once the deadline for .هو موضح أعاله settlement of tax has passed, the penalty will be imposed as described above. Cabinet Decision No. 49 of 2021 provides a special على آلية2021 ) لسنة49( ينص قرار مجلس الوزراء رقم mechanism to determine the date on which the خاصة لتحديد التاريخ الذي يجب فيه تطبيق الغرامة فيما يتعلّق penalty shall be imposed in respect of monthly وسيتم تناول هذه اآللية بالتفصيل في قسم.بالغرامات الشهرية penalties. The mechanism is discussed in detail in a . ّالحق من هذا التوضيح العام following section in this Public Clarification. )10( المخالفة رقم Violation 10 Violation 10 of Table 1 annexed to the Cabinet ) المرفق بقرار1( ) من الجدول رقم10( بموجب المخالفة رقم Decision imposes a penalty on the Registrant upon تُفرض غرامة على المسجّ ل عند قيامه بتقديم،مجلس الوزراء submitting an incorrect tax return. .إقرار ضريبي غير صحيح Whenever an error is made in a tax return, a fixed تُطبّق غرامة ثابتة،في حال ورد خطأ في اإلقرار الضريبي penalty will first apply. This penalty is AED 1,000 for ،) درهم على المخالفة للمرة األولى1,000( وتكون بمبلغ،بداية the first violation and AED 2,000 for any repeated .) درهم في حال تكرار المخالفة2,000(و violation. It should be noted that where the incorrect tax return وتجدر اإلشارة إلى أنه في حال نتج عن اإلقرار الضريبي غير results in a tax difference which is less than the fixed الصحيح فارق ضريبي أق ّل من الغرامة الثابتة المقدّرة بـ penalty amount of AED 1,000 or AED 2,000, as the تقوم الهيئة بفرض،) درهم بحسب الحالة2,000( ) أو1,000( case may be, the FTA will impose a penalty equal to )500(غرامة تساوي المبلغ األعلى بين الفارق الضريبي و higher of the tax difference and AED 500. .درهم Furthermore, the fixed penalty will not be imposed لن تُفرض الغرامة الثابتة على أي شخص يقوم،إضافة إلى ذلك .بتصحيح إقراره الضريبي قبل تاريخ وجوب تقديمه on anyone who corrects their tax return prior to the due date for submission of the return. 16/26

The amounts of VAT charged by the taxable person and input tax recoverable by the person would then need to be netted off in the tax return. The resulting amount is the net VAT payable to, or to be refunded by, the FTA. 11.3.1. Due date for submitting tax returns The due date for submitting tax returns and making a payment of payable tax to the FTA is the 28th day following the end of the tax period to which the tax return relates. It should be noted that where a payment is due to the FTA, it must be received by the FTA by the deadline. Where the due date for the submission of the tax return and the corresponding payment falls on a weekend or a national holiday, the deadline for filing the tax return or making a payment is extended to the first working day following this. Submitting a tax return or making a payment of tax late will result in a penalty levied by the FTA. All tax returns should be submitted online using the FTA portal. The return can be submitted by the taxable person, or another person who has the right to do so on the taxable person’s behalf (for example, a tax agent or a legal representative). 11.3.2. Correcting errors Where a taxable person has made an error (for example, calculated output tax incorrectly or recovered the incorrect amount of input tax), then the person is required to correct this error. Where the correction is required in respect of a tax return or a tax assessment, and the total value of the error is less than AED 10,000, the taxable person may correct the error on the tax return for the tax period in which the error was discovered. In all other cases, the taxable person must disclose the error to the FTA within 20 business days of becoming aware of the error, and request the FTA to correct the error. By making a voluntary disclosure the taxable person may be eligible for a reduction in any applicable penalty. However, where a voluntary disclosure is submitted to the FTA after the taxable person has received notice of a tax audit or while a tax audit in in progress, the voluntary disclosure will either reduce penalties to some extent or not at all. 44 VAT Guide | Taxable Person | VATG001