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UAE to reduce penalties for various tax law violations

Abu Dhabi: The Federal Tax Authority (FTA) has issued two public clarifications on the new amendment regarding penalties for tax law violations.

FTA said on Saturday that Cabinet Decision No. 49 of 2021 on amending some provisions of the Administrative Penalties for Violation of Tax Laws in the UAE is designed to support tax registrants and help them fulfil their tax obligations, thereby enhancing the state's competitiveness in the field of conducting business.

“The new amendment will become effective on 28th June, 2021, and will reduce many administrative penalties imposed for violating tax laws. This comes as part of the wise leadership’s directives to implement the tax system according to the best standards that ensure further growth for the national economy and help achieve transparency and economic momentum, providing an ideal and resilient tax legislative environment that encourages self-compliance and keeps pace with change through constant issuance of decisions in accordance with phased requirements,” said Khalid Ali Al-Bustani, Director-General of the Federal Tax Authority

Al-Bustani called on tax registrants to take advantage of the important benefits provided by the new amendment as it provides more relief to business sectors in order to support their effective contribution to boosting the national economy's growth.

Under the amendment, 16 types of administrative penalties have either been reduced or had the method of calculation amended, explaining that the reductions include penalties for administrative violations on Tax Procedures, Federal Decree Law on Excise Tax, and Federal Decree Law on Value Added Tax.

“The amendment includes fundamental amendments that provide more facilities to help taxable persons achieve self-compliance and encourage the speeding up of voluntary declaration,” said Al-Bustani

Voluntary disclosures

Under these amendments, a late payment penalty will not be imposed on voluntary disclosures if payment is settled within 20 business days of submitting the voluntary disclosure, and the sooner the taxable person declares and pays due tax according to periods of time specified by the decision, the lower the value of the penalties will be. This constitutes an incentive and a good opportunity for tax registrants who have errors in declarations, tax assessments, or requests for tax refunds, to speed up the implementation of voluntary declaration procedures and avoid increasing penalties.

The Authority noted that according to the amendment, the FTA shall re-determine the administrative penalties imposed on the tax registrant prior to the effective date of the new amendment which have not been fully paid, to be equal to 30 per cent of the total of such unpaid penalties.

In order to benefit from such a scheme, the tax registrant is required to settle their payable tax in full by no later than December 31, 2021, and 30 per cent of the total administrative penalties due and unpaid by June 27, 2021, by no later than December 31, 2021. The FTA shall determine the procedures necessary to implement this.\

Public clarifications

As part of its ongoing awareness-raising efforts, the FTA has issued two new detailed public clarifications on the amendment within the framework of the public clarification service provided on the FTA’s website.

The first public clarification details some of the fundamental amendments to the table of administrative violations and penalties related to the application of Federal Law on Tax Procedures, in order to ensure certainty of the correct application of these amended penalties.

The second public clarification details the mechanism used to re-determine some administrative penalties that were imposed before the effective date of the new amendment on 28th June, 2021.