VAT Penalties and Appeals
The VAT law has clearly defined descriptions of offenses and the penalties levied in each scenario. This is important information for all business owners, CAs and Tax Professionals as an inadvertent mistake can cause severe consequences.
What does the term Penalty mean?
Penalty may be defined as imposing monetary or non-monetary (if any) obligations on the person in addition to his normal obligations. This forces the person to comply with the legal requirements to avoid the consequences of non-compliance. It works as a deterrent to non-compliance.
What is the main reason for Penal Provisions ?
Any person who comes under this law is required to fulfill the obligations as stipulated by law. If the person fails to comply with the obligations either willfully or due to not being aware of the provisions, in order to make the person fulfill his/her legal obligations, the provision of penalty becomes essential.
What does the term Administrative Penalties mean?
Amounts imposed upon a Person by the Authority for breaching the provisions of this Decree-Law or Federal Law No. (7) of 2017 on Tax Procedures.
What does the term Administrative Penalties Assessment mean?
A decision issued by the Authority concerning to Administrative Penalties due.
What are the situations in which administrative penalty assessment will be issued by the authority?
The authority shall issue an Administrative Penalty Assessment to the person and notify the Person of the same within 5 business days as of the date of issuance in any of the following cases:
- Failure by the Taxable Person to display prices inclusive of Tax according to Article 38 of this Decree-Law.
- Failure by the Taxable Person to notify the Authority of applying Tax based on the margin according to Article 43 of this Decree-Law.
- Failure to comply with the conditions and procedures related to keeping the Goods in a Designated Zone or moving them to another Designated Zone.
- Failure by the Taxable Person to issue the Tax invoice or an alternative document when making any Supply.
- Failure by the Taxable Person to issue a Tax Credit Note or an alternative document.
- Failure by the Taxable Person to comply with the conditions and procedures regarding the issuance of electronic Tax Invoices and electronic Tax Credit Notes
What are the cases that would lead to the imposition of penalties?
Penalties will be imposed for non-compliance.
Examples of actions and omissions that may give rise to penalties include:
- A person failing to register when required to do so
- A person failing to submit a tax return or make a payment within the required period;
- A person failing to keep the records required under the issued tax legislation;
- Tax evasion offences where a person performs a deliberate act or omission with the intention of violating the provisions of the issued tax legislation
- A person failing to submit the data, records, and documents related to tax when authority is requested
- A person appointed as a Legal Representative for the Taxable Person failing to inform the Authority of his appointment within the specified timeframe, in which case the penalties will be due from the Legal Representative.
- A person appointed as a Legal Representative for the Taxable Person failing to file a Tax Return within the specified timeframe, in which case penalties will be due from the Legal Representative’s own funds.
- Registrant failing to submit a deregistration application within the timeframe specified in the Tax Law
- Taxable Person failing to settle the Payable Tax stated in the submitted Tax Return or Tax Assessment he was notified of, within the timeframe specified in the Tax Law.
- Registrant submitting an incorrect Tax Return.
- Person voluntarily disclosing errors on the Tax Return, Tax Assessment or Refund application pursuant to Article 10 (1) and (2) of this Law.
- Taxable Person failing to voluntarily disclose errors on the Tax Return, Tax Assessment or Refund Application pursuant to Article 10 (1) and (2) of this Law before being notified that he will be subject to a Tax Audit.
- Person carrying on a Business failing to offer the facilitation and assistance to the Tax
- Auditor in violation of the provisions of Article 21 of this Law.
- Registrant failing to calculate Tax on behalf of another Person when the registered Taxable Person is obligated to do so under the Tax Law.
- Any other violation for which a resolution is issued by the Cabinet
What is the penalty that will be imposed?
The Cabinet shall issue a resolution that specifies the Administrative Penalties for each of the violations listed above. Such Administrative Penalties shall be not less than 500 Dirhams for any violation and shall not exceed three times the amount of Tax in respect of which the Administrative Penalty was levied.
Can a person have the right to object the penalties imposed by the Authority?
Law confers upon a person the right to object the penalties imposed by the authorities by submitting a request to authority to reconsider any of its decisions within 20 business days of his being notified of the decision
Such decision has to be passed with the reasons within 20 days from the date of receipt of application for reconsideration from the person and the authority needs to inform the decision to the applicant within 5 business days of issuing the decision
What are the consequences if the person is not satisfied with the decision of authority?
If the person is not satisfied with the decision of the authority he has the right to apply for the consideration to “Tax Disputes Resolution Committee”
What are the consequences if the person is not satisfied with the Tax Disputes Resolution Committee?
If the Person is not satisfied with the Committee’s decision, he shall file the application with the Competent Court in the manner prescribed under Article 33 of the Tax Procedures Law.
What measures are to be taken if the taxable person fails to any payable tax or administrative penalties?
If a Taxable Person fails to settle any Payable Tax or Administrative Penalties within the specified timeframe under this Law and the Tax Law, the following measures shall be taken:
- The Authority shall send the Taxable Person a notice to pay Payable Tax and Administrative Penalties within 20 business days of the date of Notification
- If the Taxable Person fails to make payment after being notified pursuant to section (1) of this Article, the Director-General shall issue a decision obligating the Taxable Person to settle the Payable Tax and Administrative Penalties which shall be communicated to him within 5 business days from the issuance of the decision accompanied by the Tax Assessment and Administrative Penalties Assessments.
- The decision of the Director-General regarding the Tax Assessment and Administrative Penalty Assessments shall be treated as an executory instrument for the purposes of enforcement through the execution judge at the Competent Court.