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This Public Clarification (TAXP002) details the concessionary measures for redetermining administrative penalties imposed prior to 28 June 2021. It explains the implementation of the Third Article of Cabinet Decision No. 49 of 2021, which amended Cabinet Decision No. 40 of 2017. The clarification outlines the specific conditions taxpayers must meet to benefit from a penalty reduction. To qualify, a person must settle all outstanding payable tax and pay 30% of the total unsettled administrative penalties by 31 December 2021. If these conditions are met, the Federal Tax Authority will redetermine the payable penalty amount to 30%.

TAXP002

Tax Procedures Public Clarification

Redetermination of Administrative Penalties Levied Prior to the Effective Date of Cabinet Decision No. 49 of 2021

Issue

On 28 April 2021, the Cabinet issued Decision No. 49 of 2021 on Amending some Provisions of Cabinet Decision No. 40 of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE ("Cabinet Decision No. 49 of 2021"). Cabinet Decision No. 49 of 2021 amended some of the administrative penalties applicable to certain violations and allows for a redetermination of some of the penalties already imposed.

This Public Clarification provides detailed information on the redetermination of some of the penalties already imposed.

Details relating to the amendments to administrative penalties in accordance with the First Article of Cabinet Decision No. 49 of 2021 are discussed in the Tax Procedures Public Clarification "TAXP001 - Amendments to the Penalties Regime", available on the FTA's website.

Summary

Cabinet Decision No. 49 of 2021 provides for the ability to redetermine penalties imposed before its effective date (i.e. before 28 June 2021) where the penalties were imposed according to Cabinet Decision No. 40 of 2017 and certain conditions are met. This decision is applicable on all administrative penalties imposed as per Cabinet Decision No. 40 of 2017 whether in respect of tax procedures, VAT or Excise Tax.

Detailed discussion

Background

The UAE introduced Excise Tax and VAT with effect from 1 October 2017 and 1 January 2018, respectively.

In order to offer consistency in the administration of different taxes, a set of common tax procedures concerning the rights and obligations of the FTA and taxpayers has been developed and prescribed in the Federal tax procedures legislation, including in Federal Law No. 7 of 2017 on Tax Procedures ("FTP Law"). These Federal tax procedures apply to all Federal taxes under the jurisdiction of the FTA.

Article 25 of the FTP Law specifies a number of violations which are subject to administrative penalties. This Article also directs the Cabinet to issue a decision that specifies administrative penalties for each of the violations listed in the Article, on condition that each such penalty cannot be less than AED 500 for any violation and cannot exceed three times the amount of tax in respect of which the penalty was levied.