From VAT Filing, Violations and Penalties: How UAE VAT Compliance Works?

For many UAE businesses, the Federal Tax Authority (FTA) has long been seen through the lens of strict penalties and compounding fines. However, 2026 marks a turning point with the implementation of Cabinet Decision No. 129. While the rules are becoming more “business-friendly”, with late payment penalties shifting to flat 14% annualised rate, the scrutiny on accuracy has never been higher. Navigating this “New Era” of compliance requires more than just filing on time, it requires a strategic understanding of how the new relief measures protect your cash flow. In this blog, we will look at VAT filing, common violations, and the 2026 penalty structures.

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What is VAT and How Does it Work?

In the UAE, Value Added Tax (VAT) was introduced on January 1, 2018, as part of the country’s efforts to diversify its economy and reduce reliance on oil revenues. It is a consumption tax that applies to most goods and services at each stage of the supply chain, where value is added. VAT is levied at a standard rate of 5% on most goods and services, although some essential items are still zero-rated or exempted.

VAT works in the UAE through a system of input and output tax. Businesses that are VAT-registered charge VAT on their sales (output VAT) and pay VAT on their purchases (input VAT). The difference between the output VAT collected and the input VAT paid is then remitted to the Federal Tax Authority (FTA). If a business has paid more VAT on purchases than it has collected on sales, it may be eligible for a refund or can carry the credit forward to offset future tax liabilities.

The introduction of VAT was a significant move to enhance the UAE’s public finances and promote fiscal sustainability. Businesses are required to maintain accurate records, file periodic VAT returns (typically quarterly or monthly), and ensure compliance with VAT regulations.

How to File VAT in UAE?

Filing VAT in the UAE is an essential process for businesses that are VAT-registered. The process involves reporting the VAT you have collected on sales and the VAT you have paid on purchases to the Federal Tax Authority (FTA). Here is a detailed, step-by-step guide on how to file VAT in the UAE:

Log In to the FTA Portal

• Visit the official FTA EmaraTax website and log in using your user credentials (username and passwords)
• Access the e-Services portal and select VAT Return, Form VAT201 to prepare and file your VAT return

Select the Relevant VAT Return Period

VAT returns in the UAE are filed either quarterly or monthly, as assigned by the Federal Tax Authority (FTA) based on the business profile at the time of VAT registration.

• Quarterly Returns: Most VAT-registered businesses in the UAE are assigned quarterly VAT return periods. These businesses typically have a turnover of less than AED 150 million, and their VAT returns are due every quarter.
• Monthly Returns: Businesses with a turnover of AED 150 million or more or those with more complex transactions are assigned monthly VAT return periods. These businesses need to file their VAT returns every month.

Fill in the VAT Return (Form VAT-201)

The VAT return form VAT-201 is split into various sections:

• Section 1- Details of Output VAT: Report the total VAT collected on your sales during the VAT period.
• Section 2- Details of Input VAT: Report the VAT paid on business-related purchases during the same period.
• Section 3- VAT Payable/Receivable: Calculate the difference between the output VAT and input VAT:
• If output VAT exceeds input VAT, the difference is the VAT payable to the FTA.
• If input VAT exceeds output VAT, the business may be eligible for a refund or a credit carry-forward.

• Section 4- Other Details: Include any adjustments, such as VAT on exempt supplies, zero-rated goods, or imports.

Verify and Submit the Return

• Double-check Information: Before submitting, verify all the numbers, especially for discrepancies in VAT calculation. Errors can lead to penalties or delays.
• Submit the VAT Return: Once the details are complete and verified, click the “submit” button to send your VAT return to the FTA.

Pay VAT Payable (if applicable)

• If your output VAT exceeds the input VAT, you must pay the VAT due to the FTA. You can make payments through various methods, including bank transfers or via the FTA portal.
• Payments should be made within 28 days from the end of the tax periods. If payments are delayed, fines and interest charges may apply.

Receive Confirmation

• After submission, you will receive an acknowledgement receipt from the FTA. Ensure you keep this as proof of filing.
• If there are any issues with the submission, the FTA may contact you for clarification.

Maintain Records for Future Reference

Retain all supporting documents related to VAT transactions for at least five years, as required by UAE tax laws. This includes VAT invoices, accounting records, customs documentation, contracts, receipts and records of VAT returns filed. However, records relating to real estate transactions must be retained for 15 years.

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VAT Refund (If Applicable)

• If your business has more input VAT than output VAT, you can apply for a VAT refund using Form VAT311. The FTA will either refund the excess VAT or carry it forward to offset future VAT liabilities.
• Make sure you apply within the stipulated time frame to claim any VAT refunds.

“Key Deadlines to Remember:”

• VAT Return Deadline: VAT returns should be filed within 28 days after the end of each tax period (monthly or quarterly, depending on your registration). If the 28th day falls on a public holiday or weekend, the deadline moves to the next working day.
• Payment Deadline: VAT payments must also be made within 28 days after the end of the tax period.

Violations & Penalties of VAT Filing

Failure to file VAT returns on time can trigger serious financial penalties and compliance risks for businesses in the UAE. Once registered for VAT, filing returns by the due date becomes a statutory obligation, regardless of whether VAT is payable for the period. Missing or delaying a VAT return can result in the following penalties imposed by the Federal Tax Authority (FTA):

Building Long-Term Compliance Under UAE VAT Regulations

Staying compliant with UAE VAT regulations is essential for any business operating in the region. With the latest amendments effective in 2026, businesses must adapt to new requirements and maintain robust documentation to avoid penalties and ensure smooth operations. By understanding the VAT regime, following the registration process, and adhering to compliance deadlines, businesses can build credibility and authority in the UAE market.

At Whiz Consulting, we help you navigate the complexities of VAT compliance with expert guidance tailored to your business needs. Our team of expert accounting outsourcing professionals ensures that you stay updated with the latest VAT regulations and amendments, providing efficient solutions that keep you on track with your compliance obligations. With our expertise, you can focus on growing your business while we handle the intricacies of VAT compliance for you.