The business continues to grow and develop. In this process, it is important for UAE companies to recognize the impact of business changes on compliance under the VAT rules. Let us understand the types of business changes that affect corporate compliance with VAT, and the steps that should be taken in each case.
Change business details
Business changes that affect VAT compliance can be divided into two types:
1. Change account details
2. Business environment changes
Let us understand these in detail.
Change business details
Such changes apply to persons registered under VAT in the UAE. If the FTA maintains changes in its account details, it is important to notify the FTA of these changes. The FTA will modify the VAT registration accordingly.
Some examples of changes to account details, the FTA should be notified:
1. Company name or trade name
2. Composition of partnership
3. Principal place of business
4. Main business activities
5. The company’s bank account details or
6. Details of customs registration
The account details, such as business activities and customs registration information, can be changed online by logging into the FTA portal. These changes and how to make them are detailed in our article “Online revision of registration details”.
Certain other changes to account details, such as the address of the principal place of business, bank account details, must be notified to the FTA in writing. These changes are explained in detail in our article “Modification of the details of preventing online modification”.
Business environment changes
Certain changes in the business have resulted in major changes in business conditions. Examples of such changes include:
1. The merchant is no longer eligible for a registration exception
2. The business stops trading or
3. Certain taxable activities are stopped for any reason
These changes in the business environment will result in the requirement to register or cancel the registration under the value-added tax.
Administrative penalties for failing to notify the FTA of business changes
The duty of the taxable person is to ensure that the information on which the registration is based is accurate and current. If there is a change in business details, whether it is a change in account details or a change in the business environment, the taxable person shall notify the FTA of the change in relevant ways. If the FTA is not notified of changes in commercial details, penalties may apply. Administrative penalties for failure to notify FTA business changes are as follows:
Violation of administrative punishment
If the registrant has not notified FTA 5,000 of any circumstances that need to modify the information in the tax records retained by the FTA, repeat 15,000 for the first time
Therefore, it is essential that taxable persons ensure that the FTA is notified when their business details change. This change can be a change in the account details or a change in the business environment. Depending on the type of business details change, appropriate measures need to be taken to notify the FTA.
ADMINISTRATIVE PENALTY UNDER VAT IN UAE
According to the value-added tax regulations, certain violations of the “VAT Law” can incur administrative penalties. Administrative penalties are additional payments that individuals should pay for violating the provisions of the Value-Added Tax Law. Let us understand the actions taken in the United Arab Emirates to impose administrative fines based on VAT and the amount of VAT fines in each case:
Administrative penalty actions under the administrative penalty of value-added tax (AED)
1. The taxable person did not show the price including 15,000 tax
2. The taxable person fails to notify the free trade zone of the tariff and fee information based on the deposit of 2,500
3. Failure to comply with the conditions and procedures related to storing the goods in a designated area or transferring the goods to another designated area, because the fine for violation is 50,000 dirhams or 50% of the tax payable
4. The taxable person fails to issue a tax invoice or substitute document when making up 5,000 for each tax invoice or substitute document
5. The taxable person has not issued a tax credit or alternative document, and each tax credit or alternative document is 5,000
6. The taxpayer failed to comply with the conditions and procedures for issuing electronic tax invoices and electronic tax credit notes of 5,000 for each incorrect document