VAT and the Fines in UAE and KSA

VAT and the Fines

Rumour has it that the governments of UAE and Saudi Arabia have given businesses the past year to get their heads around managing VAT and building the records they need. But now it’s 2019, and apparently, the gloves are off. Both governments are going to come out swinging, in terms of auditing businesses and fining them if they (you) are not compliant.

I was talking to a Saudi mate, who told me that for the past year, he’d been filing “estimates”, which the General Authority of Zakat and Tax (GAZT) was accepting.  But he’s been told in no uncertain terms by his accountant that from now, everything has to be pin-point accurate. Which means his records need to be current and accurate, his filings need to be on time, and the calculations need to be spot-on.

It’s the same here in the UAE.  Remember when the tram started running in the Dubai Marina?  There were numerous accidents where cars cut across the tracks illegally.  But it didn’t matter all that much. Until the signs went up saying you’ll be fined 50,000 AED if you try that stunt again, dude!

Instant compliance.

When you look at the size of the fines, you know the guys at Federal Tax Authority (FTA) and GAZT are not messing around.  Here’s the most salient of those fines in the UAE. Similar fines exist in KSA:

  • Not registering on time: 20,000AED
  • Failure to keep adequate records: 10,000 first offense and 50,000 thereafter
  • Failure to notify a tax filing amendment: 5,000 first offense and 15,000 thereafter
  • Failure to pay tax on time: Up to 300% of amount!
  • Failure to report an error in filing: 2,000 AED first offense; 5,000 AED; thereafter plus 50% of the amount

And the list goes on.  This is serious stuff. Ignore at your peril.  If you get caught, you’ll go on some sort of blacklist, and your life will be hell. You’ll be targeted for investigation repeatedly.

How do I know?  It happened to a guy I used to know in New Zealand.  Yep, good old laid-back New Zealand. The reason is very clear.  IT’S THEIR MONEY. And they don’t want you messing with it.

Remember me writing about the crackdown in the UK in 2016 on small businesses understating their VAT amounts? In one year, the Revenue turned up £3.4Bn (17Bn AED) of unpaid taxes. Do you think they were relaxed about it and accepted explanations like, “Sorry… I was really busy”.

Not a chance.  There’s a really good reason why the FTA and GAZT distrust everyone who has to file VAT returns. Because the evidence is overwhelming that everyone seeks to minimise the amount. There is an entire massive global industry dedicated to tax avoidance – and a smaller, shadier global industry dedicated to tax evasion.

Brothers and sisters, I tell you solemnly.  Do not take this lightly. Do not put yourself in harm’s way. Register on time, keep really good records, file accurate returns on time.

The alternative is too awful to contemplate.

We can help.

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