uae vat penalties with fta payment instalment plan

How to Navigate UAE VAT Penalties With The FTA Payment Instalment Plan PIP?

As businesses continue to evolve in the UAE, VAT compliance remains a cornerstone of fiscal responsibility. Over the years, the Federal Tax Authority (FTA) has introduced a series of penalties aimed at ensuring rigorous adherence to tax laws.

Well, the FTA listened since ultimately UAE as an emerging business-friendly destination is all about ease of doing business. The Federal Tax Authority (FTA) now offers a viable solution for businesses and individuals grappling with VAT penalties in the UAE,  the Penalty Installment Plan (PIP). 

This article on how to navigate UAE VAT Penalties with the FTA Payment Instalment Plan PIP serves as a guide sheds light on the intricacies of PIPs, ensuring you’re well-equipped to determine if this plan suits your needs.

Does your business qualify for the FTA Payment Instalment Plan in 2023?

The FTA permits a variety of individuals to apply for PIPs. This includes registered taxpayers, authorized signatories, tax agents, legal representatives, and even unregistered taxpayers with existing liabilities. Those who fall under the unregistered category need to first set up an online user profile and proceed with the application via the Taxable Person account.

Are you eligible for FTA’s VAT Penalties Payment Instalment Plan?

PIPs cater specifically to administrative VAT penalties falling under Article 25 and Cabinet Decision 49. However, VAT penalties under Article 26 are excluded from this provision. To be considered for a PIP, the total outstanding penalties in question should amount to a minimum of AED 50,000 for a single tax type.

Understanding the Financials

Before diving into PIPs, it is crucial to ensure all related taxes corresponding to the chosen VAT penalties are settled. 

The number of installments, along with their individual amounts, depend on the proportion of administrative VAT penalties relative to the total tax due over the past year:

  • Less than 50% in administrative VAT penalties? Unfortunately, you’re ineligible for a PIP.
  • Between 50% and 100%? You can opt for a plan ranging between 4 to 8 installments.
  • Exceeding 100%? A plan spanning 8 to 16 installments can be your recourse.

In addition, it’s possible to consolidate various VAT penalties into a single PIP application as long as their cumulative value hits the AED 50,000 mark.

How to craft the Perfect Application for VAT penalty FTA PIP in the UAE?

When preparing your PIP application, ensure you encompass the entire unpaid amount pertaining to a VAT penalty. If partial payments have been made, the remaining balance can be included in the application.

All applications need the seal of approval from the authorized signatory. When tax agents or legal representatives handle the submission, the authorized signatory will be notified via email, prompting them to authenticate the declaration through e-CTS.

You have the option to save your application mid-process and revisit it when needed. However, remember that failing to submit within 60 days will result in automatic cancellation, though a reminder email will be dispatched.

Diversifying Applications Based on Tax Type 

Each PIP application caters to a distinct tax type, necessitating separate submissions for different tax categories.

Considering Waiver Requests 

A vital aspect to note is the incompatibility of simultaneous PIP applications and penalty waiver requests for identical VAT penalties with the FTA.

In essence, the FTA’s PIP serves as a lifeline for those struggling with VAT penalties in the UAE. Leveraging this facility can significantly ease financial strains and fortify compliance with the region’s tax mandates.

Awaiting FTA’s Verdict 

After putting forth a complete PIP application, anticipate a feedback period from the FTA spanning roughly 100 business days.

Navigate UAE VAT Penalties with expert support from Horizon Biz Consultancy

The UAE’s tax environment is dynamic. In order to thrive, businesses must stay updated and compliant. Using the FTA Payment Instalment Plan you can manage your cash flows and improve the profitability of your business in the long run. However, you need to have a trustworthy partner to ensure they navigate the complexities of VAT penalties with ease. For consultations, reach out to our VAT expert team led by CA Vibha Malik Modi on +971 50 841 3395 at Horizon Biz Consultancy, Dubai.

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