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UAE reduces penalties for violating tax laws

Abu Dhabi - Late payment penalty will not be imposed on voluntary disclosures if payment is settled within 20 business days of submitting the voluntary disclosure

The Federal Tax Authority (FTA) on Saturday announced a relief to businesses by reducing penalties to facilitate them in filing an accurate tax returns by June 27, 2021.

In a statement, the FTA said 16 types of administrative penalties have either been reduced or had the method of calculation amended under the latest initiative in line with Cabinet Decision No. 49 of 2021 about 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.

Khalid Ali Al Bustani, director-general of the Federal Tax Authority, said the new amendment will become effective on June 28, 2021, and will reduce many administrative penalties imposed for violating tax laws. He said late payment penalty will not be imposed on voluntary disclosures if payment is settled within 20 business days of submitting the voluntary disclosure.

“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,” Al Bustani said in a statement to Khaleej Times on Saturday.

Atik Munshi, managing partner at Enterprise House, said the relief announced by FTA on various penalties and their calculation is a positive step from the authority which will certainly be well received by the business community.

“This will also provide a proper direction on how to interpret the various articles thus a further clarity is now known. Such positive action from FTA will boost the business confidence. It remains to be seen on what shall be the outcome of the assesses who have filed and paid their penalties as per previous interpretation,” Munshi told Khaleej Times on Saturday.

Avoid late penalties

The FTA director-general 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 amendments, 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,” Al Bustani noted.

He said the amendment includes fundamental amendments that provide more facilities to help taxable persons achieve self-compliance and encourage the speeding up of voluntary declaration.

“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,” he said.

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, stressing that 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 31st, 2021, and 30 per cent of the total administrative penalties due and unpaid by June 27, 2021, by no later than December 31st, 2021. The FTA shall determine the procedures necessary to implement this.

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 https://www.tax.gov.ae/en. These public clarifications aim to familiarise persons with tax aspects which need simplified explanations, enabling them to apply the tax principles accurately and efficiently.

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 June 28, 2021.

— muzaffarrizvi@khaleejtimes.com