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New Tax Procedures Law in the UAE

October 2017 - Tax & Private Client. Legal Developments by Arendt & Medernach.

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On 31 July 2017, the President of the United Arab Emirates (the “UAE”) issued the new Tax Procedures Law (the “Law”). This Law contributes to build the UAE’s tax system, to regulate the administration and collection of taxes and most importantly, to clarify the respective rights and obligations between the Federal Tax Authority (the “FTA”) and the taxpayer.

The Law provides a set of general procedures and rules to be applied to all taxes to be introduced in the UAE, namely value added tax (the “VAT”) and excise duties. In this respect, the Law covers tax procedures including, among others, audits, objections, refunds, collection, as well as obligations, which includes tax registration, compliance and payment, as summarised below:

Records 

The Law requires any person conducting any business to keep accounting records and commercial books as well as any tax-related information determined by the relevant tax law. Tax returns, data, information, records and documents related to tax to be submitted to the FTA are required to be in Arabic. The FTA may however accept these documents in any other language to the extent that the person is able to provide, at its own expense, a translated copy into Arabic upon FTA’s request.

Tax registration

Any taxable person has to comply with its registration obligations specified under the relevant tax laws (e.g. VAT). In this respect, the registrant must communicate its tax registration number (TRN) in all correspondences and transactions with the FTA.

Tax compliance

Once registered, each taxable person has to, within the time limit, prepare and file tax returns as well as settle any tax due in accordance with the Law and the relevant tax law. Each taxpayer is responsible for the accuracy of the information and data in the tax returns and the FTA reserved the right to disregard a tax return if it does not include the basic information determined by the relevant tax law.

Tax agents

The tax agent is any person appointed on behalf of another person to represent the latter before the FTA and to assist him in his tax affaires without prejudice to that person’s responsibility. In this respect, the Law provides that tax agents must register with the FTA and satisfy specific conditions such as being of good conduct and behavior, never being convicted of a crime, holding an accredited qualification, being medically fit to exercise the profession and holding a professional indemnity insurance.

Tax audits

The FTA may perform tax audits on any person to determine its compliance with the provision of the relevant tax laws. Such audits are performed at the person’s office or at any place of business in which case it must be informed at least 5 business days prior to the tax audit. While conducting a tax audit, the tax auditors have the rights to obtain original records or copies, to take samples of the goods, equipment or other assets available at the place of business.

Tax and penalties assessment

Under certain circumstances (e.g. the taxable person submits an incorrect tax return, fails to submit a tax return in the timeframe or fails to settle the tax due etc.), the FTA will issue a tax assessment in order to determine the tax due by the taxpayer. Besides, the Law also contains lists of violations which may lead to the issuance of an administrative penalties assessment by the FTA if the taxpayer is responsible for such infringements.

The timeframe for the FTA’s tax assessments is in general 5 years after the relevant tax period. Nevertheless, in case of proof for tax evasion or non-registration for tax purposes, it is increased to a period up to 15 years.

Refund and collection

A taxpayer could apply for a refund of any tax (or administrative penalties) paid to the extent it is entitled to a refund under the relevant tax law and the paid amounts exceed the amounts effectively due.

Where a taxpayer fails to settle any tax due, the FTA would issue a notice requiring the payment of outstanding tax within 20 business days from the date of notification. If the taxpayer fails to make such payment within the timeframe, the General Director of the FTA (“Director General”) would issue a decision obliging the taxpayer to settle the outstanding tax within 5 business days from the issuance of the decision. Such a decision should be treated as an executory instrument for the purposes of enforcement through the execution judge at a competent court.

Reconsideration, objection to the committee and challenges before courts

Regarding any of FTA’s decisions, a person has the right to submit a request of reconsideration to the FTA within 20 business days from the notification. In case of rejection, the concerned person could introduce an objection to the Tax Disputes Resolution Committee.