UAE VAT Updates – Cabinet Decision on Controls and Procedures for Instalment Payment, Waiver and Refund of penalties
The UAE Cabinet issued Cabinet Decision No. 105 of 2021 (Decision) on 28th December 2021 that stipulates controls and procedures for installment payment, waiver, and refund of administrative penalties (penalties). This Decision is effective from 1st March 2022.
I. Settlement of Penalties by Instalments
The following conditions should be met to obtain approval for settlement of penalties by installments:
- The request shall be for unsettled penalties not less than AED 50,000.
- The penalties under request shall not be subject to dispute except for the objections through the reconsideration mechanism.
- There should be no outstanding tax payable for the tax period for which the request is made.
The applicant should submit the request form along with the reasons for submission and an undertaking to settle the penalties as per the plan approved by the Committee.
The Federal Tax Authority (FTA) will review the application within 40 days working days for validity. If the application is valid, the Committee shall provide its decision within the next 60 working days. No response from the Committee shall be deemed as a rejection of the request.
II. Controls and Cases for Waiver of Penalties
The Committee may approve the waiver of penalties if the following conditions are met:
- The penalties imposed should not be in connection with the tax evasion crime.
- The Committee will specify the time-frame for submission of a penalty waiver request.
- The request shall relate to one of the following cases due to which the Person failed to fulfill the tax obligation:
- Death or illness of the natural registered person or owner of the sole establishment.
- Death, illness, or resignation of a key employee of a registered establishment.
- Any restrictions or precautionary or preventive procedures imposed by government authorities in the State.
- A general malfunction in the Authority’s systems, payment gateways or used telecommunication services.
- Execution of a custodial sentence on the registered person or the owner of a sole establishment.
- The Person pays all the tax dues through another registered account for VAT purposes.
- The Person is declared bankrupt or insolvent and the tax dues are paid before the occurrence of such event unless the purpose of declaring bankrupt or insolvent is to evade the payment of the penalties.
- Any other cases assessed by the Committee.
The applicant should submit the request form along-with the reasons for submission and an undertaking that confirms the rectification of the violation and not to repeat the violation.
The time-frame for the Committee to provide its decision for waiver request is same as that for a penalty by installment.
In addition to the above, the Committee will lay down the rules and regulations for the refund of penalties collected during the preceding 5 years. These rules and regulations are yet to be published by the FTA. It would be interesting to see how this scheme benefits the taxpayers who paid bulk fines for the inadvertent mistakes made in the earlier years of implementation of the VAT Law.
HOW CAN WE HELP?
Rethink as an entity provides VAT advisory, optimization, registration, implementation, compliance, and training services in UAE, Bahrain, KSA, and the GCC.
Our team of senior qualified tax advisors, finance experts, and tax accountants are happy to provide practical help and advice to ensure timely and cost-effective VAT services.
Based on our local and international experience, we understand that VAT is a complex tax and would certainly suffer numerous changes in the upcoming years. Rethink’s VAT services are aimed to suit both basic and complex returns for SMEs and larger enterprises.
WHO ARE WE?
Re/think is a boutique accounting, audit, advisory, regulatory compliance, and tax advisory firm with offices in Dubai and Abu Dhabi (ADGM) focused on providing businesses of varying sizes with timely, proactive, and customized business solutions from start-up and early development to the latest stages of a business lifecycle.
Associate Director (Indirect Tax)