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Penalties for violation of TAX

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The FTA asserted that the Cabinet Decision would boost the UAE’s global business competitiveness by establishing a tax legislation environment that encourages self-compliance and offers significant support to the national economy. The Decision outlines 16 types of administrative penalties that have either been reduced or had the method of calculation amended. The amendments include administrative violations related to the application of Federal Law No. 7 of 2017 on Tax Procedures, Federal Decree-Law No. 7 of 2017 on Excise Tax, and Federal Decree-Law No. 8 of 2017 on Value Added Tax.

In a press statement issued today, the FTA outlined a set of conditions that need to be met in order to benefit from the redetermination of penalties. First, the administrative penalty must have been imposed under Cabinet Decision No. 40 of 2017 before 28th June 2021, and the administrative penalty due was not settled in full until 27th June 27, 2021. Furthermore, the registrant should settle all due payable tax by 31st December 2021, and settle 30 percent of the total unsettled administrative penalties imposed before 28the June 28, 2021, no later than 31st December 2021.

The FTA indicated that, should the registrant meet all these conditions, the administrative penalties will be redetermined to equal 30 percent of the total unpaid penalties that will appear on the FTA’s electronic system after 31st December 2021.

Registrants Benefit:

To help registrants benefit from the new Decision, the FTA presented a practical example featuring two cases: one where the registrant qualifies for redetermination, and another where they don’t.

The FTA urged registrants to use the “Payment Adjustment Type” feature when settling their due payments on the FTA’s e-Services portal. The feature allows taxpayers to allocate the amounts based on their payment preferences. The options available are either to pay tax first, or administrative penalties first, or by oldest liability. In order to benefit from the redetermination of penalties, registrants should re-consider the accurate selection of these options in order to achieve the intended payment allocation results.

Registrants are highly encouraged to ensure that the tax return or the voluntary disclosure is submitted before making the payment. If the registrant made the payment before filing the tax return or submitting the voluntary disclosure, and they had outstanding administrative penalties in their account, the system will settle the payable administrative penalties first, since there is no outstanding payable tax in their account at the time of making the payment.

The FTA also clarified that it is essential for taxable persons to pay their due payable tax before the due date to avoid any late payment penalties. In the same regard, the FTA clarified that bank transfers can take two or three working days to process the payment; hence, the period must be taken into consideration to ensure that FTA receives the payment before the due date.

The FTA issued two public clarifications on Cabinet Decision No. 49 of 2021, which are available on the FTA’s website.

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