VAT Disputes & Penalties in the UAE
Objections to VAT penalties, rejected refunds, return errors and voluntary disclosure — plus Corporate Tax penalties and Excise Tax matters.
Value Added Tax is applied in the UAE at a general rate of 5% on most goods and services. Although the rate appears simple, VAT-related disputes are among the most common tax files — especially late registration, late payment, rejected refunds, or disagreement over transaction classification.
VAT facts
| General rate | 5% on most goods and services. |
| Mandatory registration | AED 375,000 of taxable supplies. |
| Voluntary registration | AED 187,500. |
| Return and payment | Generally within 28 days from the end of the tax period. |
| Late registration | Penalty of AED 10,000. |
| Late return filing | AED 1,000 for the first violation, and AED 2,000 upon repetition within 24 months. |
| Late payment | 14% annually on the outstanding balance, effective from 14 April 2026 under Cabinet Decision No. 129 of 2025. |
Most common VAT disputes
- Late registration after exceeding the AED 375,000 threshold.
- Late return filing or late payment penalties.
- Full or partial rejection of VAT refund requests.
- Confusion between 5% taxable, zero-rated and exempt transactions.
- Input and output VAT errors.
- Tax invoice and credit note issues.
- Previous errors requiring voluntary disclosure.
Zero-rated vs. exempt transactions
In a zero-rated transaction, VAT may be charged at 0% while the right to recover input tax may remain available if the conditions are met. In an exempt transaction, VAT is not charged and the related input tax is generally not recoverable. This distinction is one of the main causes of disputes with the FTA.
How we build a strong VAT objection
- Identify the type of violation, legal basis and tax period in dispute.
- Review previous returns, invoices and correspondence.
- Calculate the financial effect accurately.
- Organize documents according to facts and dates.
- Draft a clear Arabic submission linking each fact to the document and the final request.
Send us the decision. We'll review it properly.
Initial review · No obligation · info@summitlegaluae.com
Tax penalties — figures and review
A tax penalty does not always mean the file is over. In some cases, an objection, reconsideration request, penalty reduction request, or correction through voluntary disclosure may be considered. The key is understanding the type of penalty, its reason, date and available documents.
| VAT — registration | AED 10,000 penalty for late registration. |
| VAT — return filing | AED 1,000 for the first time and AED 2,000 upon repetition within 24 months. |
| VAT — payment | 14% annually on the outstanding balance, effective from 14 April 2026 under Cabinet Decision No. 129 of 2025. |
| Corporate Tax | Penalties may apply for late registration, late return filing or late payment under the relevant executive decisions. |
| Reduction / installment / waiver | May be available in certain cases subject to specific conditions and supporting documents, including correcting the violation and avoiding repetition. |
How we review a penalty
- Identify the type of penalty: registration, filing, payment, disclosure, invoices or documents.
- Review the decision date and the date of knowledge/notification.
- Compare the penalty with the facts and documents.
- Determine whether the better path is reconsideration, reduction request, voluntary disclosure, or payment and risk closure.
- Draft the suitable request and attach supporting documents.
When may a reduction or waiver request be suitable?
It may be suitable where there are serious factual reasons such as circumstances beyond control, an unintentional error supported by documents, quick correction of the violation, or clear subsequent compliance. No result can be guaranteed, but the way facts and documents are presented strongly affects the request.
Excise Tax in the UAE
Excise Tax applies to specific goods such as tobacco products, carbonated drinks, energy drinks, and certain goods with health or environmental impact. Although fewer companies are affected than with VAT or Corporate Tax, classification, registration and penalty risks may be significant.
When do Excise Tax disputes arise?
- Disagreement over whether a product is subject to Excise Tax.
- Registration issues or late registration.
- Errors in calculating tax on inventory or imports.
- Disputes concerning tax warehouses or release of goods.
- Penalties resulting from audits or insufficient documents.
How we assist
We help read the FTA decision or audit notice, review product classification, study documents and invoices, and determine whether the file requires reconsideration, objection or correction of the tax position.
Send us the decision. We'll review it properly.
Initial review · No obligation · info@summitlegaluae.com