UAE Tax Registrants to Benefit from a 70% Discount on Tax Penalties as the Relief Period Extends

• New Cabinet Decision Issued On 30.12.2021
• One Year Extension of Grace Period Granted
• Taxpayers to Benefit from 70% Discount on Penalties

Following a new Cabinet Decision No 108/2021, article 3 dated 30.12.2001, on Administrative Penalties for Violation of Tax Laws; the UAE Federal Tax Authority (FTA) has clarified to the taxpayers to benefit from the extended one year grace period for re-determination of administrative penalties on violation of tax laws until 31.12.2022. The earlier deadline as per Cabinet Decision No 49/2021 was 28.06.2021 and this new decision would make the amount of the total unpaid penalties outstanding until 28th June 2021 equal to 30% of such unsettled penalties, subject to fulfilling the conditions set by the Cabinet Decision.

In effect, the new Cabinet Decision should be seen as a replacement of the third Article of Cabinet Decision No. 49/2021 to provide an extended grace period for registrants to settle the outstanding payable taxes along with the 30% of administrative penalties up until 31 December 2022 and a 70% discount on tax penalties.

The Cabinet Decision effective from January 1st 2022, should be seen as an opportunity for businesses to benefit from the reduction of the administrative penalties, highlighted the FTA. The Cabinet Decision would reduce the burdens on business sectors and help improve their contribution to the growth of the economy of the country besides enhancing tax compliance.

Unsettled administrative penalties, not imposed before the effective date, will be reduced to 30% of the total unpaid penalties subject to meeting the below-mentioned conditions.

• The unsettled penalty was imposed based on the old Cabinet Decision No. 40 of 2017
• The unsettled penalty was imposed, in full, before the effective date of 28th June 2021, and
• The tax registrant has met all of the following conditions

1. Paid the total amounts of the payable tax by 31 December 2021 with no payable tax due to the FTA. The tax authority must have received the amounts by 31 December 2021 irrespective of the tax amount being payable before or after 28 June 2021, and
2. Paid 30% of the unsettled administrative penalties before 28th June 2021 and no later than 31st December 2021

As per the new Cabinet Decision, FTA is responsible for determining the procedures for implementing the provisions for the re-determination of administrative penalties. FTA confirmed that administrative penalties imposed on the tax registrant will be redetermined within a maximum of 30 business days from the dates specified in the Cabinet Decision.

The review of records of some tax registrants is still underway to identify if there are eligible beneficiaries from the re-determination of administrative penalties scheme, FTA noted. The tax registrants who received notifications from FTA to provide supporting data must submit the required information urgently.

Tax Procedure Public Clarification, TAXP004 has been issued on 26 January 2022 by the FTA on redetermination of administrative penalties levied before the effective date of the Cabinet Decision No. 49 of 2021. With this new clarification, the earlier Public Clarification, TAXP002 stands replaced.

According to the new Public Clarification, FTA will again determine at the end of 2022, if the unsettled part of the administrative penalties which is 70% of the total amount of penalties originally levied, shall no longer need to be paid. The e-Services accounts of the tax registrants will be linked to this redetermination process by the FTA for accessing information.