Amendment of Tax Procedures Law – Federal Decree-Law No. 28 of 2021
The amendments to the Tax Procedures Law are effective from 1 November 2021, and mainly cover:
- Mechanism and requirements for objection and appeal by taxpayers.
- Alternative mechanism for objection and appeal by Government entities.
- Mechanism of waiving, refunding, and payment of administrative penalties as installments.
Mechanism and requirements for objection and appeal by taxpayers
- The tax procedures in the UAE include a mechanism to challenge decisions issued by the Federal Tax Authority (“FTA”).
- The decision dispute process starts with an application for reconsideration.
- If a person still disagrees after the FTA has issued its decision in respect of a request for reconsideration, the person may lodge an objection with the Tax Disputes Resolution Committee (“TDRC”) and subsequently appealing before the competent court.
- The changes in the Tax Procedures Law encompass two major aspects of change in relation to the procedures for objection and appeal, namely:
- Extension of the timelines within which a person may object or appeal against an FTA decision.
- Easement of requirements to pay Penalties, by removal of the requirement to pay such Penalties before access to TDRC and only requiring partial payment of Penalties before access to courts.
- In order to grant taxpayers a wider window of opportunity to object to the FTA’s decisions regarding that taxpayer, the timelines for objections and appeals have been extended as following
- Before, the amendment, the person had to apply within 20 business days from the date the person was notified of the decision.
- Now, any person may submit the application for reconsideration within 40 business days from the date the person was notified of the FTA’s decision.
- Issuing the reconsideration decision:
- Before, the FTA was bound to issue the decision within 20 business days.
- Now, the FTA shall issue a decision on the reconsideration request within 40 business days from the date of receiving the application.
- Objecting to the TDRC:
- Before, the person had 20 business days from the date the person was notified of the reconsideration decision to object against the reconsideration decision.
- Now, the person shall submit the objection to the reconsideration decision within 40 business days from the date of being notified of the reconsideration decision.
- Appeal before the competent court:
- Before, the final decisions of disputes exceeding AED 100,000 would have been deemed as executory instrument if they were not appealed before the competent court within 20 business days from the date of notification of the TDRC decision.
- Now, the final decisions of disputes exceeding AED 100,000 are considered executory instruments if they were not appealed, by the person or the FTA, before the competent court within 40 business days from the date of notification of the TDRC decision.
- Requirement to Settle Penalties – TDRC
- Before, the persons were required to pay all relevant outstanding taxes and Penalties related to the matter before being eligible to lodge an objection with the TDRC.
- Now, the persons may submit an application to the TDRC despite not having paid the Penalties imposed, as long as the full amount of tax has been settled.
- Requirement to Settle Penalties – Competent Court
- Before, the persons were required to pay all relevant outstanding taxes and Penalties before being eligible to lodge an objection with the TDRC.
- Now, the persons were required to pay all relevant outstanding taxes and at least 50% of penalties imposed before being eligible to lodge an objection with the TDRC.
Alternative mechanism for objection and appeal by Government entities:
- Cabinet shall issue a Decision adopting an alternative mechanism of objection and appeal if the parties to the dispute are any of the Federal or local Government entities specified in that Cabinet.
Mechanism of waiving, refunding, and payment of administrative penalties as installments
- Penalties may be levied where a person commits an offence. There may however be circumstances beyond the person’s control which may need to be considered.
- As per the Tax Procedures Law amendment, the FTA’s authority to waive Penalties was modified. As a result the previous committee reviewing the excuses and evidences in respect to applications to reduce or waive Penalties no longer exists.
- A new committee with the mandate to approve the payment of Penalties in installments, and waiving or refunding penalties in full or in part will be formed.
- This new committee will be established and chaired by His Highness the Chairman of the FTA or his deputy and will include two Board Members of the FTA.
- The new committee may issue a decision:
- Approving the Penalties to be made in installments;
- To waive Penalties in full or part; or
- To refund Penalties in full or part
- Consequently, any requests that are received by the FTA to waive Penalties or to pay Penalties in installments will only be processed once the Cabinet Decision stating the controls and procedures is enacted. Further information on such controls and procedures will be issued by the FTA in due course.
