On July 31, 2017, the UAE government issued Federal Law No (7) of 2017 on Tax Procedures (Tax Procedural Law). The Tax Procedural Law provides general guidance on the administration, collection, and enforcement to the upcoming tax laws in the UAE, including the Value-Added Taxes Law (VAT Law).
The following points are the highlights of the Tax Procedural Law, which UAE businesses can use in preparation of VAT implementation:
1 Businesses shall keep accounting records, commercial books and tax-related information as specified in the respective tax law.
2 Returns and documentation related thereof, which need to be submitted to the UAE Federal Tax Authority (FTA), shall be in Arabic.
1 Self-assessment of UAE businesses are required when it comes to eligibility to register or to deregister for tax.
2 Tax-registered businesses shall ensure that information disclosed to third parties and the FTA are correct, up-to-date and in correct format.
3 Licensing authorities (for instance, the Departments of Economic Development) shall share information with the FTA within 20 business days of the licence issuance.
4 Tax-registered business shall ensure that the tax returns are filed in time and correctly as well as pay the correct amount of due tax.
5 The Tax Procedural Law provides possibilities for tax-registered businesses to voluntary correct the return submitted in the previous tax period.
1 Notifications from the FTA shall be addressed to the registered address of the tax-registered businesses. Thus, it is very crucial for tax-registered business to keep their information updated and correctly registered with the FTA. The notification is considered to be served when the FTA delivers to the registered address of the tax registered business or its tax agent or its legal representative.
2 Tax-registered business is also allowed to appoint a tax agent to represent them in front of the FTA.
1 The tax audit may be performed in the place of business of the tax registered business, the FTA premise, or any other places where the tax registered business carries on business, stores goods or keep records.
2 The FTA generally gives a five-business-day notice if the audit is to be conducted in the premise of the tax-registered business. Only in very exceptional cases where the FTA visits unannounced and close the tax registered business for up to 72 hours to conduct the tax audit.
3 In normal cases, the audit shall take place during the FTA’s normal working hours.
4 Once the tax audit is completed, the FTA must inform the results to the respective tax registered business and provide the documents/data used by the FTA to arrive at the said final result (if requested by the tax-registered business).
Tax assessment and penalties
In cases of non-compliance by the tax registered business, the FTA may issue:
1 A tax assessment with the tax payable based on their own method of calculation.
2 An administrative penalties assessment and notify tax registered business within five business day. The administrative penalties shall be no less than Dh500 and more than three times of the amount of tax due.
The list of activities, which are considered to be tax evasions, are provided in the Tax Procedural Law. The penalties for such evasion can be imprisonment and/or monetary penalty.
Tax objection procedures
There are three stages for a tax-registered business to object to FTA decisions: reconsideration, through tax dispute resolution committees and UAE federal court for cases where the amount of tax and administrative penalties are more than Dh100,000.
Tax refund and collection
Tax-registered businesses may apply for refund for the excess tax paid. Before approving the refund, the FTA shall offset against any tax due or may reject if there are other disputed tax amounts.
The payable tax shall be paid within the deadline specified in the tax law to avoid administrative penalties.