UAE - Revision of Tax Penalties

 

 

 UAE Cabinet Ministry has amended certain penalties of “Cabinet Resolution No. (40) of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE”. Further the much-awaited Amnesty scheme has also been introduced for giving relief to taxpayers. We have listed below key amendments for easy reference:

 

 

·         We have captured below most “Notable Amendements” in a tabular format for ease of reference:

 

Violations	Old Administrative Penalties (AED)	Revised Administrative Penalties (AED)
Failure of Taxable person to settle Payable tax in submitted Tax return or Tax Assessment within stipulated timeframe	·         2% of unpaid tax is due immediately once payment of payable tax is late ·         4% is due on 7th day ·         1% daily penalty on unpaid amount one calendar month following deadline for payment, max upper ceiling of 300%.	·         2% of unpaid tax is due immediately once payment of payable tax is late ·         4% per month charged on unpaid amount after one month from payment due date and on the same date every month after that, max upper ceiling of 300%.
Voluntary Disclosure(‘VD’) by the taxpayer of errors in Tax return, Tax Assessment or Refund application	·         Two kind of Penalties are applied: ·         Fixed - 3000 for first time, 5000 in case of repetition ·         Percentage based penalties:	·         5% of the differential tax amount if VD submitted within 1st year of due date of tax return, tax assessment or refund application etc. ·         10% of the differential tax amount if VD submitted within 2nd year of due date of

·         50% - if VD submitted post start and notification of tax audit ·         30% - if VD submitted before start of tax audit but after receipt of notification ·         5% - if VD submitted before notification and before tax audit

tax return, tax assessment or refund application etc. ·         20% of the differential tax amount if VD submitted within 3rd year of due date of tax return, tax assessment or refund application etc. ·         30% of the differential tax amount if VD submitted within 4th year of due date of tax return, tax assessment or refund application etc ·         40% of the differential tax amount if VD submitted after 4th year of due date of tax return, tax assessment or refund application etc

 

 

·         Further certain other Administrative penalties levied for non-compliances relating to registration, deregistration, invoicing etc. has also been reduced and mentioned below:

Amnesty Scheme

·         Like KSA, UAE government has also decided to provide certain relief to taxpayers in terms of reduction in payment of unpaid penalties if certain conditions are met. It appears taxpayers has been given option to pay 30% of total unpaid penalties of past subject to the condition that they have paid all taxes due latest by 31 December 2021 and along with it have paid 30% of the total unpaid penalties latest by said date along with certain other conditions to be fulfilled /met as specified in new Cabinet Decision.

 

·         Aforementioned reductions along-with the other benefits/reliefs provided in the Cabinet decision would provide much needed relief to the taxpayer in these testing times of pandemic. Same would help in boosting the economy and act as a stress buster for the Businesses in these hard times and would encourage them to follow prudent tax practices and being compliant with tax Legislations.