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VAT Penalties/fine & Reconsideration in United Arab Emirates
If a taxable person is in dispute with Federal Tax Authority (FTA) in respect of its tax liability, there is provision in UAE VAT LAW to ask for them to be reconsidered. This request application should be in Arabic script only that can be submitted by a Registrant/tax agent containing all the details of case including evidence, reasoning and any other details that can establish your case to FTA.
FTA is quite responsive and, in most cases, when the application is comprehensive and containing proper evidence FTA tend to remove penalties partially or completely.
As per Article-27 of Federal Law No. (7) Of 2017 on Tax Procedures, the application must be submitted within 20 business days from the date the applicant is notified of the decision. The application can be submitted by using an online FTA portal. The application is only acceptable in the Arabic language (all supporting documents, certifications, etc. must be provided in Arabic).
Once Application is submitted successfully than FTA appoints a representative to review a request for reconsideration. Normal decision time for any applicationis 20 business days from receipt of the application; the applicant will be informed of the decision five days thereafter. Authority may ask for more documents/clarificationfrom the applicant.
Documents requiredfor application are:
- Authorized Signatory Passport copy
- Authorized signatory Emirates ID Copy
- Authorization proof i.e., MOA/POA
- Formal case study letter dealing with the facts along with supporting documents with legal references.
A case study letter with supporting documents
If the application is approved, the penalty amount will be reversed on applicant FTA “VAT Transaction” ledger and the applicant will receive a confirmation email from the FTA. If the application is rejected one might turn to the “Tax Disputes Resolution Committee” for further reconsideration.
AL Dhaheri Jones & Clark registered tax agency with FTA supporting all its businesses be VAT compliant around the UAE offering VAT solutions to companies. Please contact us for further information.
01.
VAT Registration
Registration as a Tax Group
Two or more Persons can opt to register as a Tax Group if it can be established that they are in association as a result of their economic, financial and regulatory practices in Business, the FTA may register them as a Tax Group after considering the individual circumstance of each case.
A Tax Group shall select one of its registered members to act as the representative member of this Tax Group. A request to register a Tax Group shall be made by the representative member of that Tax Group. The Authority should make a decision regarding any application submitted for registration of two or more Persons as a Tax Group within the period of 20 business days starting with the day on which it was received by the Authority.
Where a request to form a new Tax Group is approved, the Tax Group registration shall be in effect according to the following:
- From the first day of the Tax Period following the Tax Period in which the application is received;
- From any date as determined by the Authority.
The Authority may refuse the application for registration as a Tax Group, in any of the following cases:
- The Persons do not meet the requirements for Tax Group registration in accordance with the provisions of the Decree-Law and Article (9) of this Decision.
- Where there are serious grounds for believing that if the registration as a Tax Group is permitted, it would enable Tax Evasion or significantly decrease Tax revenues of the Authority or increase the administrative burden on the Authority significantly;
- Where any of the Persons included in the application is not a legal Person.
- Where one of the Persons is a Government Entity specified under Article (10) and (57) of the Decree Law and the other is not.
- Where one of the Person is a Charity under Article (57) of the Decree-Law and the other is not.
The Authority may reject adding a Person to a Tax Group where that Person does not meet the requirements for Tax Group registration in accordance with the provisions of the Decree-Law or for the reasons mentioned above.
The Authority may only register a Person as part of a Tax Group under Clause (7) of this Article if the two following conditions are met:
- The Person’s Business includes making Taxable Supplies or importing Concerned Goods or Concerned Services.
- If all the Taxable Supplies or imports of Concerned Goods or Concerned Services of the Business by Persons carrying on the Business would have exceeded the Mandatory Registration Threshold.
The Authority may reject the application of registration as a Tax Group if there are serious grounds for believing that registering the Related Parties would significantly decrease Tax revenue.
Amendments to a Tax Group
The representative member appointed under Article (10) executive regulation cabinet decision 52 may apply to the Authority to do any of the following:
- Add another Person to become a member of the Tax Group.
- Remove one of the members of that Tax Group.
- Nominate another member of the Tax Group to be the representative member with the consent of the other member.
- Deregister that Tax Group.
For the purposes of Clause (1) of this Article (11) executive regulation cabinet decision 52, the Authority may accept the request mentioned in the application from either:
- The first day of the Tax Period following the Tax Period in which the application is received;
- Any date as determined by the Authority.
Any Notification by the Authority, which is addressed to the representative member of any Tax Group shall be deemed to be served on the representative member and all other members of that Tax Group.
- Executive regulation cabinet decision 52, Article (12) states that registration of Persons as a Tax Group shall result in the following:
- Any Business carried on by a member of the Tax Group shall be deemed to be carried on by the representative member and not by any other member of the Tax Group.
- Any supply made by a member of the Tax Group to another member of the same Tax Group may be disregarded.
- Any supply, taxable or otherwise, by a member of the Tax Group shall be deemed to be made by the representative member.
- Any Import of Concerned Goods or Concerned Services by a member of the Tax Group shall be deemed to be an import by the representative member.
- Any supply of Goods or Services to a member of the Tax Group from a Person who is not a member of the Tax Group is a supply to the representative member.
- Any Output Tax charged by a member of the Tax Group shall be deemed to be charged by the representative member.
- Any Input Tax incurred by a member of the Tax Group shall be deemed to be incurred by the representative member.
All members of the Tax Group shall remain personally and jointly liable for any Payable Tax of the representative member.
02.
VAT Audit
What is a Tax Audit?
A procedure undertaken by FTA to inspect the commercial records or any information or data related to a Person conducting Business.
Commercial records include accounting books in relation to that Business, which include records of payments and receipts, purchases and sales, revenues and expenditures, Balance sheet and profit and loss accounts, Records of wages and salaries, Records of fixed assets, Inventory records and statements (including quantities and values) at the end of any relevant Tax Period and all records of stock-counts related to Inventory statements. Any records as may be required in the Tax Law and its Executive Regulation.
Procedure for a Tax Audit
(i) The right of the FTA to perform a Tax Audit
The FTA may perform a Tax Audit on any Person to verify the extent of that Person’s compliance with the provisions of this Law and the Tax Law. The FTA may perform the Tax Audit at its office or the place of business of the tax payer or any other place where such Person conducts Business, stores goods or keeps records. If the FTA decides to perform a Tax Audit at the place of Business of the taxpayer or any other place where such Person conducts his Business, stores goods or keeps records, the FTA shall inform him at least five business days prior to the Tax Audit.
The Tax Auditor has the right of entry to any place where the Taxpayer conducts his Business, stores goods, or keeps records, and as the case may be, it will be temporarily closed in order to perform the Tax Audit for a period not exceeding 72 hours without prior notice in any of the following cases:
- If the FTA has serious grounds to believe that the Taxpayer is participating or involved in Tax Evasion in respect to this Person or another Person;
- If the FTA has serious grounds to believe that not temporarily closing the place where the Tax Audit is conducted will hinder the conduct of the Tax Audit;
For temporary closure of Taxpayers business, the Tax Auditor shall obtain the prior written consent of the Director-General; and if the place to be accessed is a place of residence, then a permit from the Public Prosecutor shall also be obtained.
Places shall be reopened after the lapse of 72 hours, unless the FTA obtains a permit from the Public Prosecutor to extend the closure period for a similar period prior to the expiry of the preceding 72 hours.
(ii) The Right of the FTA to Access the Original Records or Copies Thereof During a Tax Audit
While conducting a Tax Audit, the Tax Auditor may obtain the original records or copies thereof, or take samples of the stock, equipment or other assets from the place at which the Taxpayer conducts his business or which are in his possession, or may seize them.
(iii) Timing of the Tax Audit
A Tax Audit will be conducted during the official working hours of the FTA. In cases of necessity, a Tax Audit may be exceptionally conducted outside of these times by a decision of the Director-General.
(iv) New Information Surfacing after a Tax Audit
The FTA may audit any issue previously audited if new information that might impact the outcome of the Tax Audit surfaces.
(v) Cooperation during the Tax Audit
Any Person subject to a Tax Audit, his Tax Agent or Legal Representative shall facilitate and offer assistance to the Tax Auditor to enable him to perform his duties.
(vi) The Rights of The Person who is Subject to Tax Audit
The taxpayer shall have the right to:
- Request the Tax Auditors to show their job identification cards.
- Obtain a copy of the Tax Audit Notification.
- Attend the Tax Audit which takes place outside the FTA.
- Obtain copies of any original paper or digital documents seized or obtained by the FTA during the Tax Audit, according to what is specified in the Executive Regulation of this Law.
(vii) Notification of the Tax Audit Results
The FTA shall inform the Taxpayer of the final results of the Tax Audit. The Taxpayer may view or obtain the documents and data on which the FTA based its assessment of Due Tax.
Role of a Tax Agent
A tax Agent can assist you in getting organized before the FTA, they can represent you before the FTA, it will save your time and a professional representation will enable you to successfully conclude your audit. Before starting of an audit it is best to get your VAT returns verified form a Tax Agent.
ADJC is pronounced Tax Agent and we can help you in review of your business systems, authenticity of your VAT returns, VAT calculations and payments, maintenance of your books and records as per FTA requirements. There are heavy penalties for non-compliance of VAT laws.
03.
VAT Agents
The concept of Tax Agent is to help businesses to be compliant in respect of their tax obligations:
- A person is allowed to appoint another person(s) as its Tax Agent(s) to act in his name and on his behalf with regards to his tax affairs with the Federal Tax Authority (FTA).
- A Tax Agent assists the person in the fulfilment of his tax obligations and the exercise of his associated tax rights.
A Tax Agent is usually engaged by his or her clients through the Tax Agency with which he or she is associated in order to provide tax related services which could include:
- Helping the businesses register with the FTA;
- Preparing and submitting tax returns to the FTA on behalf of the businesses;
- Maintaining tax related records and/or information;
- Enquiring about tax related matters with the FTA; and
- Submitting requests for reconsideration of decisions issued by the FTA.
ADJC can be your tax agent and assist you in all your tax matters listed above, it will be our duty to represent your business in FTA by providing them with all the appropriate and relevant documents, information, records, and data. We will serve as a tax agent on behalf of your company concerning all your tax issues and matters.
We at ADJC have Arabic speaking VAT consultants who can effectively and efficiently communicate in writing and verbally on your behalf with the FTA. We keep ourselves up to date with the current laws and regulations and any changes therein.
ADJC is here to support you in any situation by taking the responsibility of being your tax agent and leave all your questions about UAE VAT to us.
04.
VAT De-Registration
Tax Deregistration
The Registrant must apply to the Authority for de-registration in accordance with the cases mentioned in the Decree-Law, within (20) business days of the occurrence of any of them. The Authority shall accept a Registrant’s application for deregistration where the two following conditions are met:
- The Registrant stops making supplies and does not expect to make any such supplies over the next 12-month period;
- The value of supplies decreases AED 375,000, or taxable expenses incurred, by the Registrant over the previous 12-months is less than the Voluntary Registration Threshold and the Authority is satisfied that his supplies, or taxable expenses, expected over the next 30 days, are not expected to exceed the Voluntary Registration Threshold.
If the deregistration application is approved, the Authority shall cancel the Tax Registration of the Registrant with effect from the last day of the Tax Period during which the Registrant has met the conditions for deregistration or from such other date as may be determined by the Authority. Where the Authority is satisfied that the conditions in Clause (2) above are met, and the Registrant has not applied for deregistration, the Authority shall deregister the Registrant with effect from the last day of the Tax Period in which the Authority became satisfied that the conditions have been met or from any other date determined by the Authority.
A Registrant shall not be deregistered unless he has paid all Tax and Administrative Penalties due and filed all Tax Returns.
Goods and Services forming part of the assets of Business carried on by a Registrant shall be deemed to be supplied by him at a time immediately before ceasing to be a Registrant and any tax payable shall be included in the final tax return, unless the Business is carried on by an appointed trustee in bankruptcy.
Where a Registrant requests to be deregistered from Tax due to the reduction of his Taxable Supplies to less than the Mandatory Registration Threshold, the Authority will, if in agreement with the Registrant, cancel the Tax Registration with effect from:
- The date requested by the Registrant in the application; or
- The date on which the request is made if the Registrant did not indicate the preferred deregistration date.
Where the Authority has deregistered a Registrant from Tax, it shall notify that Registrant of the date on which deregistration takes effect within (10) business days of making the decision.
05.
VAT Penalties
VAT Penalties/fine & Reconsideration in United Arab Emirates
If a taxable person is in dispute with Federal Tax Authority (FTA) in respect of its tax liability, there is provision in UAE VAT LAW to ask for them to be reconsidered. This request application should be in Arabic script only that can be submitted by a Registrant/tax agent containing all the details of case including evidence, reasoning and any other details that can establish your case to FTA.
FTA is quite responsive and, in most cases, when the application is comprehensive and containing proper evidence FTA tend to remove penalties partially or completely.
As per Article-27 of Federal Law No. (7) Of 2017 on Tax Procedures, the application must be submitted within 20 business days from the date the applicant is notified of the decision. The application can be submitted by using an online FTA portal. The application is only acceptable in the Arabic language (all supporting documents, certifications, etc. must be provided in Arabic).
Once Application is submitted successfully than FTA appoints a representative to review a request for reconsideration. Normal decision time for any application is 20 business days from receipt of the application; the applicant will be informed of the decision five days thereafter. Authority may ask for more documents/clarification from the applicant.
Documents required for application are:
- Authorized Signatory Passport copy
- Authorized signatory Emirates ID Copy
- Authorization proof i.e., MOA/POA
- Formal case study letter dealing with the facts along with supporting documents with legal references.
A case study letter with supporting documents
If the application is approved, the penalty amount will be reversed on applicant FTA “VAT Transaction” ledger and the applicant will receive a confirmation email from the FTA. If the application is rejected one might turn to the “Tax Disputes Resolution Committee” for further reconsideration.
AL Dhaheri Jones & Clark registered tax agency with FTA supporting all its businesses be VAT compliant around the UAE offering VAT solutions to companies. Please contact us for further information.
06.
VAT Accounting Services
The business environment in UAE is very challenging and competitive, especially after the introduction of VAT. Organizations deserve an accounting and tax firm who will guide them through the complexities of financial reporting and taxation while supporting them in every aspect of their business. Our team at ADJC brings extensive experience and commitment to deliver these services with the highest level of professional integrity.
ADJC is providing tax compliance Accounting Service Our proficiency and insightful understanding will help you make most efficient changes to the core operations. Vague ideas about the VAT compliance will take you nowhere but non-compliance and penalties. ADJC ensures business are fully VAT compliant from all perspectives i.e. VAT Accounting, Record Keeping, etc.
VAT accounting is the most crucial aspect of VAT compliance, VAT Accounting requires the basic and in-depth understanding of the business environment. Our firm has the proper understanding of VAT Laws and Rules to set up accounting properly. We offer Training sessions additionally tailored to meet the needs of your organization. We train staff by imparting training to them on relevant contents and trainees are quickly able to grasp the concepts as they will be based on actual transactions and scenarios their organization is involved in.
In the UAE it is mandatory for every taxable person to maintain its record for a period of 5 years. It is mandatory to retain books of account for a period of atleast five years.
The FTA may inform the taxable person to retain the records for a further period not exceeding (4) years, in cases:
- Taxable Person’s tax obligations are subject to a dispute between him and the Authority.
- If the Person is being subject to a Tax Audit and that Tax Audit has not yet been completed.
- If the Authority has given notice to the Person that it intends to conduct a Tax Audit before the expiry of 5 years.
The time limit for record retention for real estate is 15 years after the end of the Tax Period to which they relate.
Records to be maintained by a taxable person
The Taxable Person shall keep the following records:
- Records of all supplies and Imports of Goods and Services.
- All Tax Invoices and alternative documents related to receiving Goods or Services.
- All Tax Credit Notes and alternative documents received.
- All Tax Invoices and alternative documents issued.
- All Tax Credit Notes and alternative documents issued.
- Records of Goods and Services that have been disposed of or used for matters not related to Business, showing Taxes paid for the same.
- Records of Goods and Services purchased and for which the Input Tax was not deducted.
- Records of exported Goods and Services.
- Records of adjustments or corrections made to accounts or Tax Invoices.
- Records of any Taxable Supplies made or received from non-residents, including any declarations provided or received in respect of those Taxable Supplies.
- A Tax Record that includes the following information:
- Due Tax on Taxable Supplies.
- Due Tax on imports.
- Due Tax after the error correction or adjustment.
- Recoverable Tax for supplies or Imports.
- Recoverable Tax after the error correction or adjustment.
If a taxable person or business fails to keep required records, books and documents, penalty of AED 10,000 will be given and then AED 50,000 if the offence is repeated again.