UAE introduced VAT in 2018, and since then, nearly every businessman has been the target of hefty penalties and fines due to incompliance with VAT regulations. Genuinely speaking, following FTA VAT strict Installment rules can be tough.
Many changes have been made to the UAE VAT FTA rules, whether it is about offering a time extension for non-UAE businesses to forward an application claiming a VAT refund or modifying the voluntary disclosure guide.
But recently, a surprisingly significant change has been made in the UAE tax laws where problems related to penalty waivers and installments were discussed in a new Cabinet Decree No. 105 of 2021 titled ‘Regarding Protocols and Procedures for [Tax] Penalty Installments and Waiver’.
Signed on December 28, 2021, the UAE new tax law was put out in January 2022 in the official gazette and became effective on March 1, 2022.
Now, taxable persons are allowed to resolve their administrative monetary penalty either by requesting a waiver or paying in installments. Considering specific circumstances, a waiver can be permitted for the VAT Penalties compensated in the last 05 years. Moreover, no application for installments or waivers can be accepted if litigation is continued.
According to this law, the Committee holds the power to cancel the installment plan anytime in the case of the taxpayer’s failure to submit the installments on time. For maximum ease, taxable persons in UAE who have asked the authorities for an installment of penalties can request the revision in a plan to make instant amendments. Still, first, the taxpayer must ensure to satisfy the Federal Tax Authority.z
Installments in Administrative Penalties
If you meet the criteria below, your request to pay administrative penalties in installments will get instant approval.
- You can forward an application for only an unpaid tax penalty.
- The total sum of unsettled penalties must cross AED 50,000.
- The taxable person is willing to pay the penalties in full in installments.
- The unsettled administrative installment penalties shall never be questioned by the TDRC (Tax Disputes Resolution Committee UAE) or the Federal Court.
- No tax is due for the tax period for which an installment request is being filed.
Request For Penalty Waiver Of Administrative Penalties
If you meet certain conditions, the authorities will permit the waiver for penalties. But Committee will always have the right to cancel the request for authentic reasons. But remember, the Decree never discusses single-person held limited liability businesses.
The waiver will be approved in the following scenarios, or one must comply with the following requirements:
- If the unsettled administrative monetary penalty is not associated (directly or indirectly) with tax evasion.
- The taxpayer has never been imposed officially with any restrictions, precautions, or preventative measures from the UAE government or any governmental authorities.
- Death of a natural business owner or a key employee of a tax registrant, regardless of the cause.
- If a registered taxable person had already paid the tax before he went into insolvency or bankruptcy.
- All taxes are paid through another taxable person’s tax account.
- If the natural registered person, owner of the sole establishment, or a key employee of a tax registrant is severely ill.
- In case of resignation of the key employee of a tax registrant.
- No evidence was found concerning constraints on the rights, liberty, and independence of natural taxpayers or establishment owners.
- No waiver will be accepted if a proof is found against the individual regarding general malfunctioning in the Authority’s systems, reimbursements, or used telecommunication services.
- In cases of insolvency that was not for purposes of tax evasion.
- No proof of compliance in the system of the FTA UAE or payment and communication systems.
- The registered person or the owner of an establishment has the record of “execution of a custodial sentence.”
- A penalty waiver request is forwarded within the specified time frame suggested by the Committee.
Procedures for Submitting Requests
Once you have met the necessary criteria, the taxpayer must fill out the official application forms the Federal Tax Authority UAE asked to request installment plans or a waiver. A taxable individual cannot file more than 01 application for the same penalty/ies.
Generally, the following documents and information are required in the forms:
- Personal details include correctly spelled name, updated address, and other information on the taxpayer.
- TRN (tax registration number), if applicable.
- The amount of penalty.
- The details of violations for which you are requesting.
- The original date when the penalty was applied to the business.
- Authentic reasons behind submitting the request.
Be aware of the common mistakes that can lead to the cancellation of a waiver or installments. Most importantly, you must never breach the undertakings, or else the application will be nullified, and FTA will re-impose the waived VAT penalty payment. The taxable individual is held accountable for filing an undertaking as:
- In case of an installment schedule, you MUST ensure that your application states that the installment will be remunerated per the schedule specified by the Committee.
- In case of a waiver request, you MUST ensure that your application states that the reasons for the administrative penalties will indeed be mended and corrected. The taxpayer must promise not to make a mistake ever in the future.
Timeline & Committee Decisions
Federal authority of tax takes 40 business days for:
- Reviewing your request
- Making sure that your application is in full compliance with official government standards
- Verifying each control & procedure sketched during the cabinet decision is being followed properly.
If the application is found valid, it shall be sent to the Committee, who takes approx. 60 business days for taking the final decision of approval or cancellation. The applicant will be informed within 10 business days. If you notice a “lack of a decision,” consider it a denial. In case of installment application approval, you will be asked to provide corporate, personal, or bank guarantees.
The Committee is not only accountable for setting the timeline for filing waiver and installment applications but also has a free will to decide how much percentage of administrative penalties will be renounced, the payment dates, the total amount to be waived off, and a new plan against admissible excuse for defiance with the payment schedule.
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