Assuming that you have had a conversation regarding VAT penalties with your accountant, you might feel as though all your options have been completely exhausted. This is where you probably require some additional assistance in understanding VAT penalties and how they can be avoided. This blog will give you an insight into what is VAT penalty, the conditions under which the penalty has been issued and ways through which you can avoid them.
What is VAT penalty?
VAT penalties in Dubai were introduced in order to stop non-tax paying companies from gaining an unfair benefit in the market that could adversely affect their revenues and thereby affecting the company’s growth. This itself can be deemed as a great idea that will not offer an unbiased competition in the market, but also ensure that the country’s economy flourishes.
However, this is supposedly being a great problem for companies as there are certain rules and regulations that have to be followed, otherwise, this can lead to penalties. Firstly, it is not necessary for your company’s account to tell you to register for VAT, instead, as the owner of the company, ideally, you should take the responsibility and register your company under VAT.
Additionally, you must make sure that you read all the rules thoroughly. If you are misapplying VAT, or if you are not charging VAT while buying and selling goods, this gives you an unfair advantage that is not reasonable on other companies.
On the other hand, if you are planning to buy goods in UAE and are planning to sell them in the UK so as to make some profits, not paying VAT will give you an unfair advantage which should be certainly avoided for the country’s development. However, if you have a reasonable excuse, you can get out of it, otherwise, your firm will surely incur a penalty.
Is there a VAT excuse?
An excuse will be accepted only when an unforeseeable or an exceptional event occurs that prevents you from adhering to the mandatory rules and regulations. Generally, some typical reasons include death, accident, or some serious illness of someone who is closely connected to you. However, it is highly unlikely for you to escape these penalties if your accountant has made an error while updating the accounts or records.
How is VAT penalty calculated?
The VAT penalty is highly dependent on if the violation was involved and if so, it is calculated with the percentage of the potential lost VAT revenue. The violation is evaluated based on if it was done deliberately, in a concealed way, deliberately but not concealed, or entirely not deliberately. All these will be taken into account before the VAT penalty is announced to the company. The best way you could get rid of this is by hiring a consultancy who will take care of all these sensitive issues as you continue to build a successful firm.