Redetermination of Administrative Penalties Levied

On 28^th April 2021, the Cabinet of Federal Tax Authority (FTA), UAE issued Decision No. 49 of 2021, amending the administrative penalties imposed on violations of tax laws in the UAE and allows for a redetermination of some of the penalties already imposed. The FTA, as well has released two public clarifications providing guidance on how this Cabinet decision will be implemented.

The Cabinet Decision No. 49 of 2021 allows redetermination of administrative penalties imposed before 28^th June 2021 where the penalties were imposed under Cabinet Decision No. 40 of 2017 and certain conditions are met. This decision of the FTA is a concessionary measure aimed at helping businesses and is applicable on all administrative penalties imposed whether in respect of tax procedures, VAT or Excise Tax.

The public clarification on Cabinet Decision No. 49 of 2021 specifies the conditions to be met to benefit from the redetermination which are as follows;

1. The administrative penalties as per Cabinet Decision No. 40 of 2017 has been imposed on the person before 28 June 2021 i.e. before the effective date of Cabinet Decision No. 49 of 2021.
2. The person has not settled all the administrative penalties imposed on him in full before 28 June 2021.
3. The person has undertaken the following also;
   2021. Settled all payable tax by 31^st December 2021, whether such tax was due before or after 28 June 2021 and that all such amounts have been received by the FTA by 31^st December 2021.
   2022. Settled 30% of the total unsettled administrative penalties imposed before 28 June 2021, no later than 31 December 2021.

Where the above conditions are met including the settlement of 30% of penalties imposed before 28 June 2021, the FTA will, at the end of 2021, redetermine the amount of administrative penalties payable and the person shall not be required to pay the remaining part (i.e. 70%).

For example: a penalty of AED 10,000 was imposed on a taxpayer as per Cabinet Decision No. 40 of 2017 at the end of March 2021 which remain unsettled as on 28 June 2021. The taxpayer has settled all payable tax including the tax payable on last return of 2021 and 30% of the unsettled penalty (i.e. AED 3,000) by 31^st December 2021. In this case, the taxpayer qualifies for redetermination and the FTA redetermines his penalties. Consequently, he is not required to pay the remaining 70% of his penalty (i.e. AED 7,000) and the administrative penalty imposed before 28 June 2021 shall become equal to AED 3,000 (30%) which is already settled by the taxpayer. In case the taxpayer has failed to settle either 30% of the administrative penalty imposed before 28 June 2021 or any tax payable as on that date before 31 December 2021, he will not be qualified for redetermination and is required to pay the full amount of penalties.

To facilitate the procedures for registrants, the FTA has already linked the redetermination process and the relevant data to the registrant’s e-Services portal account.