The Tax Authority Provided an Overview of Cabinet Decision No. 49 of 2021 which Amends Administrative Penalties
During the first tax agent session of 2021, the Tax Authority confirmed that Cabinet Decision No. 49 of 2021 related with changes to some of the requirements of Cabinet Decision No. 40 of 2017, on administrative fines and penalties for non-compliance with tax laws and regulations applicable in the United Arab Emirates (UAE), provides businesses relief and allows for the re-determination of unsettled administrative penalties and fines which were imposed on tax registered persons prior to June 28, 2021, the effective date of the Decision No. 49 of 2021.
The tax authority organized the first session of 2021 as part of its strategy to introduce the recent updates and developments concerning the tax legislation environment within the UAE. The virtual session was attended by many authorized tax agents (268 to be exact) and FTA officials and representatives. An in-depth presentation regarding the implementation of the recent decision and the relief it will give to the tax registered persons was displayed, in addition to the provisions that are specifically required to benefit from the re-determination of penalties imposed on registrants.
The new decision states 3 conditions that must fulfilled for tax registered persons to actually benefit from the process of re-determining due and unsettled penalties. The first condition states that penalty must have been imposed as per the aforementioned previous decision on penalties for non-compliance with tax laws and regulations applicable within the UAE before June 28, 2021, which is the effective date of the new decision, and remains due on that date.
The second condition states that the tax registered person settles all the unpaid tax by December 31, 2021, and the third and final condition requires persons registered with the tax authority to pay 30% of penalties unsettled by June 28, 2021, on or prior to December 31, 2021. During the virtual session, it was discussed that if all the above mentioned conditions are not met then the tax authority, after December 31, 2021, will re-determine the unpaid penalties that are due on June 28, 2021, to be equal to 30% of such unsettled penalties. This will free the registrants from settling the rest of the 70% and the relief will be applicable when the tax registered persons meets the aforementioned conditions.
The representatives of the tax authority also provided insight about the non-compliance and penalties, sixteen of which have been amended either in value or in the calculation method set in the above mentioned Cabinet Decision. The changes have impacted penalties applied due to non-compliance with the Federal Decree-Law No. 7 of 2017 on Excise Tax, the Federal Law No. 7 of 2017 concerning Tax Procedures, and Federal Decree-Law No 8 of 2017 on Value Added Tax (VAT).
During the virtual session, the tax authority representatives answered a number of different queries raised by the visiting agents regarding the changes and reduction in penalties on Excise Tax and VAT.
As part of its currently ongoing efforts for spreading awareness, the tax authority has recently made public 2 new clarifications on the changes made with regards to penalties as well as the re-determination of penalties imposed prior to June 28, 2021, and is available on the FTA’s website.