The FTA vide clarification TAXP002 has clarified the law promulgated through Cabinet Decision 49 of 2021 and has stated that where penalties are imposed before 28th June 2021 the same can be redetermined by FTA where following conditions are met.
- There are administrative penalties imposed on a taxpayer by FTA before June 28, 2021.
- These administrative penalties are not settled by the tax payer in full before June 28, 2021.
- The taxpayer has ensured that by December 31, 2021, no tax payable is outstanding against him.
- 30% of the total administrative penalties are settled by the taxpayer by December 31, 2021.
Where all the above conditions are met, the FTA may redetermine the administrative penalties and the taxpayer may not be required to pay the remaining 70% of the penalty.
The FTA will link the redetermination process to the taxpayer’s e-services account which will be available on June 28, 2021.
Amendment of administrative penalties imposed for violation of Tax Laws and reduction of previously imposed penalties
The Cabinet Decision 49 of 2021 amends some of the administrative penalties imposed vide Cabinet Decision 40 of 2017. The FTA has issued clarification TAXP001 to explain the amendments made vide Cabinet Decision 49 of 2021 and the new mechanism of calculation of penalties. The important changes in the administrative penalties are given below:
Record keeping, registration/de-registration and amendment
- Failure to maintain proper records and information – AED 10,000 for the first time and AED 20,000 in case of repetition;
- Failure to register on time- AED 10,000 ;
- Failure to de-register on time – AED 1,000 in case of delay and on the same date monthly thereafter, upto a maximum of AED 10,000
- Failure to inform about any particulars to be amended in the Tax records– AED 5,000 for first time and AED 10,000 in case of repetition
Tax returns, Voluntary Disclosures and Tax Refunds
- Failure to settle payable tax stated in the submitted tax return, or voluntary disclosure (VD) or tax assessment within specified time frame
- 2% for first month and 4% thereafter on monthly basis, maximum upto 300%.Due date for Voluntary disclosure and Tax assessment
is 20 business days from date of submission or Tax assessment.
(i) The submission of incorrect tax return / submission of Voluntary Disclosure
a. AED 1,000 for first time
b. AED 2,000 in case of repetition
(ii) Submission of Voluntary Disclosure in respect of errors in Tax return, Tax Assessment or Tax Refunds
a. 5% if Voluntary Disclosure submitted within 1st year of due date of Tax Return etc
b. 10% if Voluntary Disclosure submitted within 2nd year of due date of Tax Return etc
c. 20% if Voluntary Disclosure submitted within 3rd year of due date of Tax Return etc
d. 30% if Voluntary Disclosure submitted within 4th year of due date of Tax Return etc
e. 40% if Voluntary Disclosure submitted within 4th year of due date of Tax Return etc
This penalty is in addition to the penalty described in (i) above. These penalties are also applicable to tax refunds filed.
(iii) Failure to file Voluntary Disclosure for an error in Tax return, Tax Assessment or Tax Refund
· a. 50% of amount of error
· b. 4% for every month or part of month
This penalty is in addition to the penalty described in (i) above.
(i) The failure to display prices inclusive of tax-AED 5,000.
(ii) Failure to provide price list of the Excise Goods produced, imported or sold – AED 5,000 for first time and AED 10,000 in case of repetition.
(iii) Failure to inform about appointment of legal representative – AED 10,000.
(iv) Failure to issue a Tax invoice or tax credit note – AED 2,500 for each detected case.
(v) Tax unaccounted for due on import – 50% of unpaid or undeclared tax.
- 2% for first month and 4% thereafter on monthly basis, maximum upto 300%.Due date for Voluntary disclosure and Tax assessment is 20 business days from date of submission or Tax assessment.