UAE VAT Updates – UAE Supreme Court’s first ruling on Tax Evasion
The UAE Federal Supreme Court ruled on the first Tax Evasion case ordering payment of five times the amount of the evaded tax, amounting to approximately 4 million Dirhams.
Tax Evasion is defined in the Tax Procedures Law as “the use of illegal means resulting in the reduction of the amount of the Due Tax, non-payment thereof, or a refund of a tax that a person does not have the right to have refunded under any Tax Law.”
At first, the taxpayer (appellant) had presented his case to the Court of First Instance (Primary Court), and it held that the taxpayer has committed the crime of Tax Evasion and ordered the taxpayer to pay five times the tax evaded.
The taxpayer appealed the Primary court’s judgement in the Court of Appeal. The Court of Appeal rejected the taxpayer’s defences and upheld the Primary Court’s judgement.
Later, the taxpayer challenged the Court of Appeals judgment before the Federal Supreme Court. In May 2021, the Federal Supreme Court upheld the judgement of the Primary Court and the Court of Appeal thereby rendering the first recorded Supreme Court case on Tax Evasion.
The Tax Procedures Law states the penalties for Tax Evasion as imprisonment and/or a penalty of up to five times the amount of the evaded tax.
This landmark judgement passed by the UAE Supreme Court indicated that the taxpayers involved in Tax Evasion are exposed to a severe risk of being penalised with maximum penalties and/or imprisonment.
As a good compliance practice and to avoid harsh penalties from the Authorities, the taxpayers are recommended to voluntary disclose the errors committed while submitting VAT returns within the timelines and in the manner specified in the 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 we are?
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)