If the UAE was already a favorable country to do business, then now it is even more beneficial. During the last weeks, the authorities have been encouraging investors and entrepreneurs with a new national regulation. Turns out that the UAE decides to reduce tax penalties even further to allow all companies to grow efficiently.
In this article, you will learn everything you need to know about this decision that the UAE government has made. Besides, we will explain the details of this new resolution to help you understand it better. Also, we will take a look at the advantages that this decision can provide to investors like you. Let’s observe:
- What is this resolution that the UAE government issued recently?
- Key amendments of the administrative penalties in the UAE.
- Learn how to calculate penalties.
- Information about the discounts for previously imposed penalties.
- When will this new decision be effective in the UAE?
- What are the benefits that this new decision can provide to entrepreneurs?
- Tips for entrepreneurs to enjoy this new tax advantage in the UAE.
- What other benefits can entrepreneurs and investors obtain in the UAE?
- How can Connectfz help you to set up your company in the UAE?
1. What is this resolution that the UAE government issued recently?
A few days ago, the UAE government made an important decision and it will relieve many businesses across the country. This decision was issuing a new resolution to reduce tax penalties and encourage all companies to make voluntary disclosures. This can also be an opportunity for them if they make a mistake in their returns.
Besides, this new resolution can also be favorable for all these companies during the COVID-19 pandemic. Some experts say that this reduction in late payment penalties for VAT will help companies to face the cash crunch. Due to the current market conditions, some businesses cannot settle their tax liabilities on time, and that’s why this decision can help them.
The UAE government issued this new resolution known as “Cabinet Decision N° 49 of 2021” on April 28th, 2021. This decision indeed reduced significantly the quantum of penalties in several categories of violations. However, since the UAE decides to reduce tax penalties, it is important to know all details. Therefore, keep reading this article to learn more information about it.
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2. Key amendments of the administrative penalties in the UAE.
The new resolution specifies these amendments:
- It reduced AED 20,000 to AED 10,000 for the failure of the taxable person to submit a registration application. The submission of this application must have been submitted within the timeframe specified in the Tax Law.
- Also, it reduced AED 10,000 to AED 1,000 monthly (without exceeding AED 10,000) for the failure of the taxable person to submit a deregistration application. Similarly, this must be within the timeframe that the Tax Law specifies.
- It reduced AED 15,000 to AED 5,000 for the failure of the taxable person to display prices inclusive of VAT.
- For each tax invoice, AED 5,000 was reduced to AED 2,500 for each instance discovered. It’s for failure by the taxable person to issue a tax invoice or tax credit note. It also applies when the person issues an alternative document when making any supply.
- Also, AED 5,000 for each tax invoice was reduced to AED 2,500. This is in case the taxable person fails to comply with the conditions and procedures. These conditions and procedures are related to the issuance of electronic tax invoices and electronic tax credit notes.
In addition, the government also reduced the percentage-based penalties applicable to the late payment of the tax due. This is applicable in the tax return, in the voluntary disclosure, or in the tax assessment. Besides, the authorities also eliminated the 1 percent daily penalty that they previously imposed. Let’s see how to calculate the new late payment penalty now:
- 2 percent of the unpaid tax due on the day after the payment due date.
- And a 4 percent monthly penalty due after one month from the payment due date. It must be on the same date every month thereafter and on the amount of tax that hasn’t been paid to date.
3. Learn how to calculate penalties.
This is how the resolution stipulates how to calculate the late payment penalty:
- Firstly, 20 business days as of the submission date of voluntary disclosure.
- And secondly, 20 business days as of the receipt date of a tax assessment.
These override the application of the late payment penalties from the due date of filing of the tax return. Also, you can use a UAE VAT late payment penalty calculator to get a more accurate result.
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4. Information about the discounts for previously imposed penalties.
On the other hand, the resolution also reduced those administrative penalties that haven’t been paid. It reduced them to 30 percent of total unpaid penalties, as long as they meet these conditions:
- Those penalties were there before, specifically under the previous Cabinet Resolution N° 40/2017.
- The registrant must have paid all taxes due by December 31st, 2021.
- And lastly, by December 31st, 2021, the registrant should have paid 30 percent of the total penalties due and unpaid by the effective date of the new resolution.
In case you need it, you should also learn how to check VAT fine before completing any process.
5. When will this new decision be effective in the UAE?
Another important thing you should know is the date on which this new decision will be effective. It shall be effective after 60 days from the date of the resolution issuance. The UAE decides to reduce tax penalties and issued the resolution on April 28th, 2021. It means that it will be effective on June 28th, 2021.
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6. What are the benefits that this new decision can provide to entrepreneurs?
As we previously mentioned, this new measure can bring relief to all entrepreneurs, investors, and their businesses. Nonetheless, it can also bring many other benefits to them during this pandemic situation that we’re currently going through. After the UAE decides to reduce tax penalties, the impact was very positive, so let’s see its advantages:
- There was a reduction in late payment penalty from 1 percent per day to 4 percent per month.
- If the company pays the tax within 20 days of its submission, there is no late payment penalty on voluntary disclosure.
- Also, there is the introduction of an amnesty scheme that enables a reduction in unpaid past penalties by 70 percent.
Besides being the main changes, these are also the new advantages that all businesses can have in the UAE. Now thanks to these changes, the reduced rates of penalties are in line with the late payment tax penalties. We are talking about the late payment tax penalties prevalent in other tax jurisdictions across the globe.
On the other hand, the UAE authorities will not impose late payment penalties on voluntary disclosures. However, there is one condition; the payment must be settled within 20 business days of submitting the voluntary disclosure. To summarize, the sooner the company declares and pays the tax, the lower the value of the penalties will be.
The government’s new decision can also be a great opportunity for all tax registrants to do several things. For instance, this incentive is beneficial for those who have errors in declarations, requests for tax refunds, or tax assessments. Most importantly, it will help them to avoid increasing penalties by speeding up the implementation of voluntary declaration processes.
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7. Tips for entrepreneurs to enjoy this new tax advantage in the UAE.
Before you can obtain the benefits of this new regulation, you must have a clear understanding of it. Most importantly, you should also understand the entire tax system perfectly, along with its advantages and disadvantages. Therefore, since the UAE decides to reduce tax penalties, we recommend you find more information about this matter.
Nonetheless, if you cannot find the required information or guidance on your own, you can ask your business partner. Usually, many new entrepreneurs and investors decide to request the services of a business setup partner. The main reason for this is that it helps them to set up their companies faster.
However, there is another reason why having a business partner can be beneficial for them. And that reason is that they can get the guidance they need to continue growing in the country. Therefore, we also recommend you find a reliable business setup partner that helps you to understand this new resolution.
Another important tip you should consider is avoiding late penalties to enjoy the benefits of the new regulation. Besides, it will also make it reach its main purpose, which is helping taxable persons to achieve self-compliance. Subsequently, the new decision will also speed up the voluntary declaration, and lastly, it’ll boost the national economy’s growth.
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8. What other benefits can entrepreneurs and investors obtain in the UAE?
Besides this new advantage, the UAE also provides many other benefits to allow investors to operate their businesses. Keep in mind that you can obtain these benefits too regardless of the location you choose in the UAE. Now, let’s take a look at some of the most favorable elements of having a company in this country:
- If you set up your business in a free zone in the UAE, you will have 100 percent of ownership.
- Also, you can obtain 100 percent of repatriation of capital and profits.
- There are full exemptions from several taxes, including corporate, personal, and income taxes.
- You will be able to get many support services and facilities from the government.
- All entrepreneurs can develop their companies by using a world-class infrastructure.
- Due to the geographical location of the country, there is easy access to many international markets.
- There is also a wide range of allowed business activities, licenses, and locations to choose from.
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9. How can Connectfz help you to set up your company in the UAE?
Now that the UAE decides to reduce tax penalties, this is the best moment to start your company. Our professional team can help obtain the guidance you need to set up your business in the UAE. Besides, our services will help you to reduce the time that the process usually takes. After the process, your company will start operating efficiently.
In case you do not have a clear understanding of the tax regulations in this country, we can help you. If you request our tax advisory services, you will obtain the information you need about this matter. Moreover, your company will be able to manage this area with more experience.
On the other hand, you can request other services to make your business operations more efficient. For example, you can request our UAE market entry services to help you enter the local market in no time. Also, you can recruitment and staff outsourcing services in case you are looking for excellent employees and workers.
Would you like to contact Connectfz to obtain more information about the new decision of reducing tax penalties for all companies in the UAE? If you have any questions, call us on +97143316688. You can email us at email@example.com, and you will talk to one of our representatives who will answer your questions.