INTRODUCTION

Cabinet Decision No. 49 of 2021 provides for the ability to redetermine penalties imposed before its effective date (i.e. before 28 June 2021) where the penalties were imposed according to administrative penalties imposed as per Cabinet Decision No. 40 of 2017 whether in respect of tax procedures, VAT or Excise Tax.

 

VIOLATIONS UNDER VAT

The Authority shall issue an Administrative Penalties Assessment for a Person and notify him within five business days for any of the following violations :

  • The failure of the Person conducting Business to keep the required records and other information specified in this Law and the Tax Law.
  • The failure of the Person conducting Business to submit the data, records and documents related to Tax in Arabic to the Authority when requested.
  • The failure of the Taxable Person to submit a registration application within the timeframe specified in the Tax Law.
  • The failure of the Registrant to submit a deregistration application within the timeframe specified in the Tax Law.
  • The failure of the Registrant to inform the Authority of any circumstance that requires the amendment of the information pertaining to his tax record kept by the Authority.
  • The failure of the Person appointed as a Legal Representative for the Taxable Person to inform the Authority of his appointment within the specified timeframe, in which case, the penalties will be due from the Legal Representative’s own funds.
  • The failure of the Person appointed as a Legal Representative for the Taxable Person to file a Tax Return within the specified timeframe, in which case the penalties will be due from the Legal Representative’s own funds.
  • The failure of the Registrant to submit the Tax Return within the timeframe specified in the Tax Law.
  • The failure of the Taxable Person to settle the Payable Tax stated in the submitted Tax Return or Tax Assessment he was notified of, within the timeframe specified in the Tax Law.
  • The submittal of an incorrect Tax Return by the Registrant.
  • The voluntarily disclosure by the Person of errors occurring in the Tax Return, Tax Assessment or Refund Application pursuant to Article 10 (1) and (2) of this Law.
  • The failure of the Taxable Person to voluntarily disclose errors in the Tax Return, Tax Assessment or Refund Application pursuant to Article 10 (1) and (2) of this Law before being notified that he will be subject to a Tax Audit.
  • The failure of the Person conducting Business to facilitate the work of the Tax Auditor in violation of the provisions of Article (21) of this Law.
  • The failure of the Registrant to calculate Tax on behalf of another Person when the registered Taxable Person is obligated to do so under the Tax Law.
  • Any other violation for which a Cabinet Decision is issued.

 

REDETERMINATION OF ADMINISTRATIVE PENALTIES IMPOSED PRIOR TO THE EFFECTIVE DATE OF CABINET DECISION NO. 49 OF 2021

As a concessionary measure aimed to help businesses, Cabinet Decision No. 49 of 2021 gives the FTA ability to redetermine the amounts of unsettled payable administrative penalties, which were imposed on registrants on the basis of the penalty rules listed in Cabinet Decision No. 40 of 2017.

To benefit from the redetermination, all of the following conditions have to be met:

  1. Any of the administrative penalties set out in Cabinet Decision No. 40 of 2017 have been imposed on the person before the effective date of Cabinet Decision No. 49 of 2021 (i.e. before 28 June 2021);
  2. The person has not settled all the administrative penalties imposed on it as per Cabinet Decision No. 40 of 2017 in full before 28 June 2021.
  3. The taxable person has undertaken all of the following:
  • Settled all payable tax, i.e. the registrant shall ensure that by 31 December 2021, no payable tax is still outstanding whether such tax was payable before or after 28 June 2021, and that all such amounts have been received by the FTA by 31 December 2021; and
  • Settled 30% of the total unsettled administrative penalties referenced above which were imposed before 28 June 2021, no later than 31 December 2021.

Where the above conditions are met, the FTA will, at the end of 2021, redetermine that the administrative penalties payable and not settled by 28 June 2021 equal 30% of that unsettled part. Hence, the Person shall not be required to pay the remaining part (i.e. 70%).

 

Example 1:

 At beginning of April 2021, a penalty of AED 12,000 was imposed on a Registrant as per Cabinet Decision No. 40 of 2017. The Registrant settled AED 2,000 of this penalty on 15 April 2021. On 28 June 2021, AED 10,000 penalties remain unsettled. The Registrant settled all payable tax including that relating to the last return due in 2021 and 30% of the penalties unsettled (i.e. AED 3,000) by 31 December 2021. In this case, the Registrant qualified for redetermination, and the FTA re-determined its penalties. Consequently, the Registrant will no longer be required to pay the remaining AED 7,000 of the administrative penalties, and the administrative penalty imposed before 28 June 2021 shall equal AED 3,000 that was already settled by the Registrant.

 

Example 2:

 At beginning of April 2021, a penalty of AED 12,000 was imposed on a Registrant as per Cabinet Decision No. 40 of 2017. The Registrant settled AED 2,000 of this penalty on 15 April 2021. On 28 June 2021, AED 10,000 penalties remain unsettled. The Registrant settled 30% of the penalties unsettled (i.e. AED 3,000) but did not settle all payable tax. In this case, the Registrant does not qualify for redetermination as it has not settled all payable tax. Consequently, the Registrant is still required to pay the remaining AED 7,000 of the administrative penalties.

 

PROCEDURES RELATING TO THE REDETERMINATION OF ADMINISTRATIVE PENALTIES

To facilitate the procedures for registrants, the FTA will link the redetermination process and the relevant data to the registrants’ e-Services accounts. The registrants will be able to view further information relating to the process as of 28 June 2021.