IF YOUR FIRM IN THE UAE CROSSES THE VAT OR CORPORATE TAX THRESHOLD BUT YOU FAIL TO REGISTER, THE CONSEQUENCES CAN BE SERIOUS.

1. Heavy Penalties and Fines

• VAT (for turnover above AED 375,000/year):
  • Failure to register penalty: AED 10,000 (one-time)
  • Late payment penalties: Up to 300% of the unpaid VAT
  • Interest charges on outstanding amounts
• Corporate Tax (profit above AED 375,000/year):
  • Non-registration or non-filing can result in:
    • Penalties starting from AED 10,000
    • Additional fines for inaccurate returns or failure to pay

 2. Backdated Tax Liability

• You will still owe taxes from the date your obligation began, not from the date you register.
• This means you’ll have to pay taxes retroactively, with penalties and interest.

 3. Business License Suspension or Cancellation

• Authorities can suspend or revoke your trade license.
• This leads to a shutdown of operations.

 4. Audit and Investigation

• The Federal Tax Authority (FTA) can audit your business.
• If they detect intentional non-compliance, criminal charges may apply.

 5. Legal Action

• Repeated or deliberate avoidance may lead to court proceedings and even imprisonment in extreme cases (especially if fraud is involved).

What You Should Do Now

If you’ve crossed the threshold:

• Register immediately on the FTA portal for VAT and Corporate Tax.
• File any missed returns voluntarily.

Consider consulting NEX AUDIT SOLUTIONS to handle backdated filings and minimize penalties.