Redetermination of Administrative Penalties

1. Redetermination of Administrative Penalties Unlike the other public tax clarification, TAXP004 is the replacement of already published public tax clarification TAXP002 with amendments to administrative penalties. The cabinet decision No.49 of 2021 was amended by cabinet decision No.108 of 2021 on administrative penalties for violation of tax laws in the UAE with effect from 1 January 2022. Re determination of Administrative Penalties Imposed on Person To redetermine the amounts of unsettled payable penalties which were imposed on registrants based on penalty rules listed in cabinet decision no 40 of 2017, all the following conditions must be satisfied.

2. Any administrative penalties set out in cabinet decision no 40 of 2017 have been imposed on the person before 28 June 2021. The person has not fully settled the administrative penalties before 28 June 2021. The taxable person has undertaken any of the following. a) Settling the following amount by 31 December 2021 All payable tax up to 31 December 2021, regardless of whether such tax was payable before or after June 28, 2021. And, 30% of the total unsettled administrative penalties imposed were before 28 June 2021. b) Settling the following amount by 31 December 2022 All payable tax up to 31 December 2022, regardless of whether such tax was payable before or after June 28, 2021. And, 30% of the total unsettled administrative penalties imposed were before 28 June 2021. If all the above conditions are fulfilled, the Federal Tax Authority will redetermine the amount of administrative penalties payable and not settled by 28 June 2021 to equal 30% of that unsettled part. As a result, the person need not have to pay the remaining 70%. Redetermination of Penalties on Registrant’s Account The same condition applied to a person should be satisfied for a registrant account in which the registrant satisfied the conditions by 31 December 2021. In that case, FTA will redetermine the penalty within 30 business days from 31 December 2021. However, if the conditions were not satisfied on 31 December 2021 but were able to satisfy on 31 December 2022, the FTA will redetermine the penalty within 30 business days from 31 December 2022.

3. The Third Article of the Cabinet Decision No. 49 of 2021 states that: The Authority shall determine the Administrative Penalties levied on the Registrant prior to 28 June 2021 in accordance with Cabinet Decision No. 40 of 2017, which have not been settled, to equal 30% of the total of such unsettled penalties where all of the following conditions are met: ■ The Registrant settles payable tax in full no later than 31 December 2021. ■ The Registrant settles 30% of the total unsettled Administrative Penalties no later than 31 December 2021. If the Registrant fails to meet the requirements of Clause 1 on or before 31 December 2021, the Registrant may meet the requirements no later than 31 December 2022. The Authority shall determine the procedures for implementing the provisions of this Article, taking into consideration that the Administrative Penalties levied on the Registrant are redetermined by Clause 1 of this Article within a maximum of 30 business days from the dates specified in Clauses 1 or 2 above, depending on the date the conditions are met. Discount of 70% on Tax Penalties According to the Tax Consultants in UAE, taxable persons who have been subject to penalties imposed before 28 June 2021 can benefit from a 70% discount on penalties. The timeframe to benefit from the discount on penalties has been extended up until 31 December 2022. So the top accounting firms in UAE consider the public clarification VATP004 is a great boon for the business community to overcome the Covid Pandemic recession and market pressure. Please contact us for any VAT related services and assistance.