UAE: AMENDMENT OF ADMINISTRATIVE PENALTIES IMPOSED FOR VIOLATION OF TAX LAWS AND REDUCTION OF PREVIOUSLY IMPOSED PENALTIES
On 28 April 2021, the UAE Cabinet of Ministers issued Resolution No. 49/2021 to amend the provisions of Cabinet Resolution No. 40/2017 relating to administrative penalties imposed for violation of Tax Laws in the UAE.
Federal Tax Authority (FTA) has called upon tax registrant on Monday, 24th January 2022 to benefit from Cabinet Decision No 49 of 2021, to extend the grace period for re-determination of administrative penalties on violating tax laws until 31/12/2022.
EFFECTIVE DATE OF THE NEW CABINET RESOLUTION
The new resolution shall be effective after sixty (60) days from the date of its issuance on 28 April 2021, i.e. effective as from 28 June 2021.
Cabinet Decision no. 49/2021 replaced Cabinet Decision no. 40/2017 relating to administrative penalties imposed for the violation of Tax Laws in the UAE.
Amendment of administrative penalties
The new resolution amends the administrative penalties listed in Table No. (1), Table No.(2) and Table No. (3) of Cabinet Decision No. 40/2017.
Some of the key amendments to the administrative penalties listed in the new resolution are as follows (non-exhaustive list):
AED 20,000 reduced to AED 10,000 for failure of the taxable person to submit a Registration Application within the timeframe specified in the Tax Law.
• AED 10,000 reduced to AED 1,000 monthly (not exceeding AED 10,000) for failure of the registrant to submit a Deregistration application within the timeframe specified in the Tax Law.
• AED 15,000 reduced to AED 5,000 for failure by the taxable person to display prices inclusive of VAT.
• AED 5,000 (for each tax invoice) reduced to AED 2,500 (for each instance discovered) for failure by the taxable person to issue a tax invoice / tax credit note or an alternative document when making any supply.
• AED 5,000 (for each tax invoice) reduced to AED 2,500 (for each instance discovered) for failure by the taxable person to comply with the conditions and procedures regarding the issuance of electronic tax invoices and electronic tax credit notes.
• Moreover, the percentage based penalties applicable to the late payment of the tax due - in the tax return or in the voluntary disclosure or in the tax assessment - are reduced and the 1% daily penalty previously imposed is eliminated.
• The new late payment penalty is now calculated as follows (the 300% cap still applies):
• 2% of the unpaid tax due on the day following the payment due date,
• 4% monthly penalty due after one (1) month from the payment due date, and on the same date every month thereafter, on the amount of tax that has not been paid to date.
• The voluntary disclosure penalties that are applicable to the difference between the tax declared and the tax due are now linked to the period during which the taxpayers amend the previously submitted VAT returns and range between 5% (in case the voluntary disclosure was submitted within 1 year from the due date of tax return or tax assessment or refund application) and 40% (in case the voluntary disclosure was submitted after the 4th year).
• Please refer to the Cabinet Resolution No.49/2021 for a comprehensive list of the amended administrative penalties for violations of tax laws in the UAE.
Discounts for previously imposed penalties
Administrative penalties - that have not been paid - imposed before the effective date of the new resolution will be reduced to 30% of total unpaid penalties if all of the following conditions are met:
1. The penalty must have been imposed and due before June 28, 2021
2. Settle all due payable tax by December 31, 2022.
3. Settle 30% of the total unsettled administrative penalties imposed before
June 28, 2021 no later than December 31, 2022.
If these conditions are met, the administrative penalties shall be redetermined after 2022 and registrant won't be required to pay the remaining 70% of the unpaid administrative penalties.