Federal Decree-Law No. 28 of 2022 on Tax Procedures (“Decree-Law”) and its Executive Regulation. Cabinet Decision No. 74 of 2023 (“New Executive Regulation”) repealed Cabinet Decision No. 36 of 2017 on the Executive Regulation of Federal Law No. 7 of 2017 on Tax Procedures, and its amendments with effect from 1 August 2023.
The main changes in the New Executive Regulation are in relation to the following topics:
- Definitions (Article 1):The definition of the term “assets” has been expanded to include intangible assets, which now includes patents, brands, licenses, trademarks, computer programs, copyrights, goodwill and also customer lists.
- Accounting records and commercial books (Article 2): In addition to the records and books of the business, businesses must also retain all documents which includes, but is not limited to: tax invoices, licenses, agreements/contracts, documents containing details of any election, tax related calculations, transfer pricing documents, etc.
3. Period of record keeping (Article 3): The New Executive Regulation specifies that,
- For real estate records, the retention period is seven years from the end of the calendar year in which such record or document was created.
- General document retention period of five years will be extended by one year starting from the date of submission of a voluntary disclosure in the fifth year from the end of the relevant tax period.
- Legal representatives are required to retain the required books and records of the person they are representing for a period of 1 year from the date on which such legal representation ends..
- Procedures relating to Tax Registration, Deregistration, and Amending details of Registration (Article 6): Registrant shall notify the Authority within 20 Business Days of any change in name, business address, email address, nature of business, trade licence activities & legal status.
4. Language (Article 5): The FTA may now accept the tax return, data, information, records and any other tax related documents can be submitted in English or Arabic. If the documents are submitted in English, FTA may request to translate some or all documents into Arabic. The translation into Arabic must be approved by the translator defined in the translators list.
5. Procedures relating to Tax Registration, Deregistration, and Amending details of Registration (Article 6): Registrant shall notify the Authority within 20 Business Days of any change in name, business address, email address, nature of business, trade licence activities & legal status.
FTA may, deregister a registrant where the person is required to deregister for a specific tax type but fails to submit a deregistration application while continuously submitting nil returns for Excise Tax, ceases to manufacture or import excise goods or where the value of supplies, taxable expenses do not meet the voluntary registration threshold for VAT registration.
6. UAE Licensing bodies (Article 7): Licensing bodies in the UAE must now also notify the FTA, within 20 business days of any issuance or renewal, of a number of data regarding license.
7. Voluntary disclosure (Article 10): If a taxpayer becomes aware of an error or omission in a tax return submitted to the FTA – following course of action is prescribed:
- if the payable tax amount is more than AED 10,000, the Taxable Person shall submit a Voluntary Disclosure to the Authority within 20 business days from the date when the Taxable Person became aware of the error.
- Whereas, the amount is less than AED 10000 than the error can be corrected in Tax Return that has not become due for submission for a previous Tax Period or in the Tax Return for the Tax Period in which the error has been discovered, whichever is earlier.
- If a refund application that has been submitted which is found to be incorrect, that too can be amended by submitting a voluntary disclosure within 20 days from the date when tax payer became aware of the error.
- In case where there is error or omission without there being difference in due tax, such error may be corrected in a manner to be specified by the FTA.
8. Means of notification (Article 11): The FTA may now in addition also use text messages and mobile application to notify a Taxable person.
9. Registration of Tax Agents (Article 12): A natural person can Register as Tax Agents with minimum education and relevant experience in Tax of at least 3 years obtained in the last 5 years and holds at least a certified bachelor degree or Masters in tax, accounting or law from an education institution recognised by the competent authority in the UAE. The natural person shall need to pass a qualification test and complete proper training on ongoing basis. The natural person must have the ability to communicate orally and in writing in Arabic or English and must be medically fit to perform his duties.
10. Tax audits (Article 16): The FTA is now required to give a person at least 10 business-day notice before conducting a tax audit. Further,
- FTA auditor will mark original documents for indicating that they have been inspected.
- FTA in its record will provide description of the documents that were removed.
- If FTA intends to dispose of an asset, it can also notify other specified persons if owner of asset is unavailable.
- FTA will provide documents, data and information on which the FTA based assessment of due tax within 10 business days from the date of receiving the request.
11. Reconciliation process – Tax Evasion crimes (Articles 23 and 24): For tax evasion crimes and the deliberate failure to settle administrative penalties, a person may submit a reconciliation application to the FTA before the initiation of the criminal case. Also, before a criminal case is initiated, for the specific tax crimes that are specified under Article 25(4) of the Decree-Law, and where these crimes resulted in tax evasion the person must first make a payment of AED 50,000 before the FTA may reconcile. Reconciliation should be made by settling the full amounts of payable tax and administrative penalties. The accused or convicted person may submit a reconciliation application to the competent federal public prosecution at any stage of the criminal case.
12. Extension of deadlines (Article 25): The FTA may extend the deadline for deciding on a Tax assessment review request and a request for reconsideration for a period of 20 business days and 60 business days for deciding on a Tax objection.
13. Bankruptcy (Article 27): Where a Business is subject to bankruptcy, and a trustee is appointed