UAE: New rules on administrative penalties waivers and installments
Following the issuance of Federal Decree Law No. 28 of 2021 to revise the provisions of Federal Decree Law No. 7 of 2017 on Tax Procedures relating to tax disputes and resolution in the United Arab Emirates, a new Cabinet Decree No.105 of 2021 was issued on December 28, 2021 covering the controls and procedures associated to the waiver and installment of administrative penalties. The new Cabinet Decree comes into effect on March 1, 2022.
Administrative penalties installments
The approval of applications to pay administrative penalties in installments is subject to the following conditions:
- The installment application/request must be in respect of unsettled penalties only;
- The amount of penalties subject to installment should not be less than fift thousand dirhams (i-e; 50,000 AED)
- Penalties subject to installment should not be already disputed in front of the Tax Disputes Resolution Committee (TDRC) or Federal Courts (excluding the reconsideration process);
- The tax due for the tax duration subject to the installment application/request is solved.
Administrative penalties waivers
The acceptance and approval of applications to waive administrative penalties is subject to penalties not be associated with tax evasion case(s). The new Cabinet Decree lists the accepted reasons to permit penalty waivers as follows:
The request should be linked to any of the following cases:
- Death or illness of the taxpayer if the taxpayer may be a natural person or owner of an institution .
- Resignation, illness or death of a key employee of the tax registrant.
- Evidence of restrictions, preventive or precautionary measures, applied on the taxpayer by United Arab Emirates government agencies.
- Evidence of system failure of the Federal Tax Authority (FTA), or payment and communication systems failure that affects a category of persons.
- Causes relating to restrictions on liberty and freedom of a natural person taxpayer or establishment owner.
- Payment of all taxes through the tax account of another registered taxpayer.
- In cases of insolvency or bankruptcy, penalties could be waived if they need been paid before the insolvency or bankruptcy, and if it's evident that the insolvency or bankruptcy wasn't for purposes of evasion .
Methods related to the submission of installment or waiver requests
- The request for either waiver request or an installment must include the general details e.g. tax number , penalty amounts, reasons, etc.
- An undertaking should be filed by the taxpayer:
- For installment requests, the undertaking must state that the penalties are going to be paid in accordance with the payment schedule that's accepted by the Committee.
- For waiver requests, the undertaking must state that the explanation for the penalties shall be rectified, which the cause won't occur again.
- Violation of the undertakings will invalidate and reverse the underlying request.
- A taxpayer should not file more than one request for the same penalty[ies].
- Failing to stick to an installment payment plan may end in either:
- A new payment plan if there's a justifiable excuse for non-compliance with the schedule, or
- Action by the FTA against the taxpayer to gather the penalties.
- The FTA has 40 business days to review the application for compliance with all requirements. If the request is authentic, it will be referred to the Committee.
- The Committee has 60 business days to take a decision on the request and 10 days to notify the applicant thereafter.
- Lack of a decision is ciunted as a final rejection.
The Committee will be responsible for:
- Setting the deadline for filing waiver requests.
- Draw the payment procedures and schedules for installment applications.
- Decide the share of penalties to be waived in respect of waiver requests.
- Request any guarantee it sees fit to process an installment application.
Retrospective penalty refund
The Cabinet Decree grants the Committee the authority to stipulate the circumstances and rules in respect of paid penalties within the previous 5 years.
If paid penalties are waived retrospectively, the paid penalties subject of the waiver are going to be credited to the taxpayer’s account with the Federal Tax Authority (FTA) within 90 business days or pay back in cash in case the taxpayer has canceled their tax registration.