Introduction
Cabinet Decision No. 74 of 2023 outlines the executive regulations for Federal Decree-Law No. 28 of 2022 regarding tax procedures in the UAE. These regulations detail the requirements for maintaining accounting records, the processes for tax registration and deregistration, the obligations of licensing authorities, and the responsibilities of legal representatives and tax agents. This decision became effective on Aurvgust 1, 2023. However, for a juridical person registered as a tax agent, it became effective on December 1, 2023.
Maintaining Records
Requirement of Accounting Records
Entities must maintain detailed accounting records and commercial books, including:
- Balance Sheet
- Profit and Loss Account
- Records of Wages and Salaries
- Records of Fixed Assets
- Inventory Records at the end of relevant tax periods
- Supporting documents such as Invoices, Contracts and Correspondence
***Apart from this, the authority may request additional information to verify tax obligations.
Record Retention Period
- Five years for taxable persons after the end of relevant tax period.
- For other person, five years from the end of the calendar year in which the concerned year in which the concerned document was created.
- Seven years from the end of the calendar year in which the related documents were created for real estate records.
- For Legal Representatives, one year from the date on which such legal representation expires.
***Extended retention periods apply in cases of disputes, audits, or voluntary disclosures.
Methods of Record Keeping
Records can be maintained as original documents or certified copies, ensuring information is identical to the originals, easily retrievable and easily readable. The retained or stored information shall be in a manner that enables the Authority to verify the taxable person’s tax obligations.
Tax Registration and Deregistration
Tax Registration
Applications for tax registration must be submitted in an approved form and manner with all necessary supporting documents. The Authority shall review the application and confirms registration by issuing or reactivating a Tax Registration Number.
Notification of Change
Registrants must inform the Authority of any data changes within 20 business days. Such as Name, address, email address, trade license activities, nature of business, legal entity type etc.
Tax Deregistration
Applications for tax deregistration must be submitted in an approved forms and manner. The Authority shall review the application and may specify any supporting documents to be submitted for that purpose. Tax deregistration will be completed by suspending the Tax Registration Number.
***If the Registrant fails to submit a deregistration application, the Authority may deregister the Registrant following the controls and procedures outlined in the Tax Law.
Licensing Authorities’ Obligations
The government entity which grants licenses must notify the Authority within 20 business days of issuing or renewing licenses.
Roles and Responsibilities of Legal Representatives
- Notification of appointment: Legal representative must notify the Authority of their appointment, providing names, address, appointment’s duration and other necessary details and documents.
- Verification: The Authority may call for additional information from legal representative, taxable person, or any other person to verify the appointment.
- Acceptance: The Authority shall notify the Legal representative within 20 business days from accepting the appointment of the legal representative.
Payments and Credit
- Allocation: Payments made without specifying tax type or period can be allocated by the Authority to settle outstanding dues based on the seniority of such dues.
- Excess payment: Excess payments are treated as credit for future liability unless a refund is requested.
- Notification: Authority shall notify the allocation of the payment and use of the credits to the taxable person.
Voluntary Disclosure
- When Tax Return or Tax Assessment is incorrect: Taxable persons must submit a voluntary disclosure within 20 business days of discovering errors in tax returns or assessments if discrepancies exceed 10,000 dirhams.
If the discrepancies equal 10,000 dirhams or less:
- Correct the mistake in the next due tax return or the return for the period in which the error was found.
- If there is no upcoming return to correct the mistake, submit a Voluntary Disclosure within 20 business days.
- Errors in Refund Claims: If a Taxpayer finds that their refund application is wrong and they are claiming more than they should, they must notify the Authority within 20 business days, unless the error is from a tax return or assessment, in which case the rules in point 1 apply.
- If there is an error in the tax return but it doesn’t change the amount of tax owed, the Taxpayer must correct it or submit a Voluntary Disclosure as specified by the Authority.
Notification Methods
The Authority shall notify at the address registered with it to the Person, its Tax Agent or Legal Representative, as applicable, by any of the following means:
- Post, registered post, email, mobile text message, smart applications or the electronic system of the Authority.
- Posting in a prominent place in the Premises of the Person.
- Any other means as may be agreed in writing by the Person and the Authority.
Tax Audits
- Conducting Tax Audit: The Authority’s decision to conduct a Tax Audit is entirely up to them and cannot be disputed or challenged by anyone. The Authority may decide to audit a Person previously audited.
- Notice of Tax Audit: The taxable person shall receive a notice about the tax audit at least ten business days before it begins.
- Results of the Tax Audit
- Tax audit results must be communicated within 10 business days from the end of the Tax Audit.
- Taxpayers have the right to request and obtain relevant documents and information used in the assessment.
Seizure and Retention of Documents and Assets
- Tax auditors can copy, mark, and seize documents and assets.
- They must provide a record of seized items within a specified time.
- Details in the record include purpose, description, storage location, and duration of seizure.
- Authority may retain seized items for the duration necessary for tax audit completion.
- Procedures for handling, returning, and disposing of seized assets are outlined.
- Options for accessing seized documents or assets are specified.
Tax and Administrative Penalties Assessment
A Tax Assessment provides details to determine the amount of Tax owed or refundable under the Tax Law. It includes, Person’s information, Tax Assessment reference number, Tax type, Tax summary, Reason of assessment, Net tax due, Due date and payment method.
Administrative Penalties Assessment includes, Person’s Information, Violation, Penalty Summary and Total Penalties Due.
***Once Tax amount or Administrative Penalty is assessed and notified to a person, it becomes a debt payable to the Authority.
Procedures for Handling Seized and Abandoned Goods
- Sell of Perishable or Dangerous Goods: The Authority can sell seized or abandoned goods if they are perishable, likely to run out or leak, or could endanger other goods or facilities. This sale will be conducted through a public auction as per the Authority’s rules
- Documentation and Notification: The Authority must document the seized goods, provide a copy to the owner or specified persons, and notify them of the decision to sell the goods, including the reason and sale date. If the goods can’t be sold or are perishable and lose value, the Authority can destroy or dispose of them after notifying the owner.
- Recovery and Handling of Seized Goods: Owners can reclaim seized goods by paying all due taxes, penalties, and expenses within five business days of notification, with proof of ownership and payment. The Authority may also establish procedures for storing and moving perishable, depleting, or dangerous seized goods.
Extended Deadlines
The Authority and Committee can extend deadlines for reviewing tax assessments or objections by up to 20 and 60 business days, respectively, if necessary.
They may also extend submission deadlines for tax assessment reviews, reconsiderations, or objections in cases of valid reasons like emergencies, with appropriate justifications required.
Tax Refunds
If a tax payer has overpaid taxes and qualify for a refund under the law, they can apply using the approved forms and manner. The tax authority will review the application and notify tax payer of their decision within 20 business days, or longer if necessary, from the date of submission of refund application. Upon approval, authority will initiate the refund within 5 business days in accordance with their specified procedure. If all required tax returns haven’t been submitted, the refund may be delayed until they are. Once all returns are filed, any excess amount will be refunded according to the law.
Payment of Tax and Penalties in Bankruptcy Cases
If a business goes bankrupt and a trustee is appointed, the trustee represents the business until their appointment ends. The trustee must inform the tax authority within 20 business days of their appointment. The tax authority will then inform the trustee about any taxes or penalties owed and may conduct a tax audit for specific periods within 20 business days after being notified. The trustee is responsible for paying any taxes or penalties owed to the authority according to the laws and regulations.
Conclusion
Cabinet Decision No. 74 of 2023 introduces essential guidelines for the UAE’s tax procedures, replacing and superseding the provisions laid out in Cabinet Decision No. 36 of 2017. This new framework establishes clear guidelines for tax registration/deregistration, record-keeping, audits, clear responsibilities for licensing authorities and legal representatives, aimed at enhancing transparency and efficiency in tax administration. While Decision No. 74 nullifies any conflicting rules from its predecessor, it also ensures continuity for decisions and procedures already in place, provided they align with its updated provisions. This transition underscores the UAE’s commitment to modernizing its tax system, fostering a stable and predictable regulatory environment essential for sustainable economic growth.