UAE makes fundamental changes to tax procedures law

Monday, 19 April 2021
The United Arab Emirates' (UAE’s) cabinet has decreed amendments to its penalty regime for tax violations, to reduce the burden on taxable businesses that are unable to pay retrospectively imposed late-payment penalties for voluntary disclosures.
penalty notice

The cabinet resolution also aims to encourage taxpayers to come into tax compliance by voluntarily correcting previous tax declarations, as well as encouraging them to pay due taxes before the tax audit or assessment by the UAE Federal Tax Authority (FTA).

The time limit for notification of a tax return mistake is to be extended from ten to 40 working days. The FTA will then have 40 working days, starting from the date of receiving the application, to issue its decision to waive or reduce administrative penalties.

The amendments are intended to help resolve the controversy, caused by the UAE's Supreme Federal Court judgment in October 2020, concerning the imposition of penalties resulting from a taxpayer's voluntary disclosure. That decision took a different position from that of the official tax dispute resolution committees and the federal primary and federal appeals courts on the calculation of penalties confirming that late payment penalties are retrospectively payable at a maximum of 300 per cent of the tax debt in most voluntary disclosure cases, in addition to fixed penalties and percentage-based 'tax benefit' penalties.

It is not clear how the newly decreed rules will interact with cases that are still being litigated before the various federal courts, especially those involving voluntary disclosure penalties.

These developments ‘confirm the necessity for taxpayers to adequately consider adopting appropriate strategies before or when pursuing tax challenges before the TDRC [tax dispute resolution committees] and Federal Courts that would adapt with any new legislative developments,’ said Mohamed El Baghdady, Senior Associate, Tax Litigation, at Dubai law firm Baker McKenzie Habib Al Mulla.

Amendments are also being made to insolvency law to help natural persons to cope with the current circumstances and to ease the burden on the business sector.


The content displayed here is subject to our disclaimer. Read more