VAT Penalties in the UAE: FTA's Instalment Plan Solution

Effortlessly Managing VAT Penalties in the UAE

The UAE Federal Tax Authority (FTA) offers a solution in the form of Penalty installment plans (PIPs). In this article, we will address your most pressing questions about PIPs, helping you gain a clear understanding of how they work and whether you qualify.

Who Can Apply for a VAT Penalties UAE Instalment Plan?

Eligible individuals who can submit a PIP application include registered taxpayers, authorized signatories, legal representatives, tax agents, and unregistered taxpayers with liabilities. In the latter case, you'll need to create an online user profile and apply from within the Taxable Person account.

What VAT Penalties Can You Include?

Only administrative VAT penalties under Article 25 and Cabinet Decision 49 are eligible for inclusion in a PIP application. Unfortunately, VAT penalties under Article 26 do not meet the criteria.

Minimum Amount Requirement To qualify for a VAT Penalties UAE PIP application, you must have at least AED 50,000 in outstanding penalties within a single tax type.

Settlement of Outstanding Tax Obligations Before considering a VAT Penalties UAE PIP, it's essential to ensure that all tax due amounts associated with the selected VAT penalties have been fully filed and paid.

Customizing the VAT Penalties UAE PIP, the number of installments and their respective amounts are determined by the percentage of administrative VAT penalties in comparison to the total due tax in the last 12 months:

• If administrative VAT penalties make up less than 50% of your due tax, you won't be eligible for a PIP.
• If they account for 50% to 100% of your due tax, you can apply for a plan with 4 to 8 installments.
• If administrative VAT penalties exceed 100% of your due tax, you can request a plan with 8 to 16 installments.

Including Multiple VAT Penalties in a Single Application You have the flexibility to include multiple VAT penalties in one VAT Penalties UAE PIP application, provided they collectively amount to a minimum of AED 50,000.

Inclusion of Partial Penalty Amounts Your application should encompass the entire outstanding amount of a VAT penalty. If you've already paid a portion of a VAT penalty, you can include the remaining outstanding balance.

Declaration Signing The declaration within the application must be signed by the authorized signatory. In cases where a Tax agent or Legal representative submits the application, the authorized signatory will receive an email notification to sign the declaration through e-CTS.

Saving Your Application as a Draft For your convenience, you can save an application in progress as a draft and return to complete it later. Keep in mind that if you don't submit it within 60 calendar days, the application will be automatically canceled, with email reminders sent to prompt completion.

Response Timeframe Following the submission of your completed VAT Penalties UAE PIP application, expect a response from the FTA within approximately 100 business days.

Separate Applications for Different Tax Types Each VAT Penalties UAE PIP application must be submitted separately for each tax type.

Penalty Pending with Waiver Committee:  It's important to note that you cannot simultaneously apply for a VAT Penalties UAE Instalment Plan and request a penalty waiver for the same VAT penalty with the FTA.

Understanding the VAT Penalties UAE Instalment Plans can help effectively manage the VAT penalties in the UAE. If you qualify, exploring this option can alleviate your financial burden and ensure compliance with tax regulations.

For more in-depth information and guidance, please feel free to reach out to us.

CA. Ajil Varghese
Manager – Taxation
M: +971564709920 E: ajil@emiratesca.com