Deadline Alert: December 31st is the Due Date for Tax Penalty Redetermination

Only a few days are left for the UAE tax registrants to avail the benefits of the tax penalty amnesty scheme rolled out by the Federal Tax Authority (FTA). Tax registrants can leverage the redetermination of administrative penalties by settling 30% of the total unpaid penalties on or before 31st December 2021. Tax consultants in Dubai can help the taxpayers benefit from the amnesty scheme.

The amnesty scheme is as per Cabinet Decision No. 49 of 2021 on the Administrative Penalties for Violation of Tax Laws in the UAE that came into force on June 28, 2021. Consult with tax agents in Dubai to take benefit of the scheme before the deadline. Even though the amnesty scheme is a blessing for tax registrants, it is subject to certain conditions. This article gives you a detailed review of the conditions and other aspects you need to know. Read ahead.

Three Conditions for Redetermination of Tax Penalties 

Tax registrants who have incurred tax administrative penalties in the UAE must fact-check whether they are eligible for the FTA’s tax penalty amnesty scheme. The Cabinet Decision No. 49 of 2021 has laid out three major conditions for tax registrants to be eligible for the scheme. Tax agents in Dubai can help businesses to assess their eligibility. The three conditions are given below:

1. An administrative penalty must have been imposed under Cabinet Decision No. 40 of 2017 before June 28, 2021. And the administrative penalty due was not settled in full before June 28, 2021
2. The tax registrant should settle all payable tax by December 31, 2021
3. The tax registrant should settle 30% of the total unsettled administrative penalties due until June 28, 2021, no later than December 31, 2021

Make Voluntary Disclosures  

Tax registrants should submit the tax returns or voluntary disclosure before making the payment. If any payment has been made before the filing of tax returns or voluntary disclosures and had outstanding administrative penalties in their account, the system will settle the payable administrative penalties. This is because there is no outstanding payable tax in the registrant’s account at the time of making the payment. Consult tax agents in Dubai before making the payment to ensure full compliance with the procedures.

Flexible Method of Payments 

The FTA has made a flexible payment mode for settling the tax administrative penalties in the UAE. Tax registrants can use the ’Payment Adjustment Type’ feature in the portal to complete the prices of settling the administrative penalties. It’s a flexible feature that lets the registrants allocate the amount as per their preferences. Registrants are advised to select their preferred option to obtain the intended payment allocation results. Tax agents in Dubai can perform these actions in compliance with the FTA’s procedures on behalf of the tax registrant.

An Illustration of Tax Penalty Redetermination 

Tax registrants are required to know how the redetermination is performed. This can be illustrated through the following examples:

Example 1 

A tax registrant in the UAE incurred a penalty of AED 12,000 as per the Cabinet Decision No. 40 of 2017. The registrant has managed to settle AED 2,000 as of 15 April 2021. However, AED 10,000 remain pending from the penalty amount as of 28 June 2021. The registrant managed to settle 30% of the unsettled penalty (AED 3,000) by 31^st December 2021 and also paid all the payable tax including the last return due in 2021.

In this case, the registrant is eligible for the FTA’s tax penalty amnesty scheme. FTA has predetermined the registrant’s penalties and the taxpayer need not pay the remaining AED 7,000 of the administrative penalties. Moreover, the administrative penalty imposed before 28 June 2021 (AED 3,000) was already settled by the registrant. Consult with tax consultants in Dubai for more clarity on the matter.

Example 2 

A penalty of AED 12,000 was imposed on a tax registrant at the beginning of April 2021 as per

Cabinet Decision No. 40 of 2017. The registrant manages to settle AED 2,000 as of 15 April 2021. As of 28^th June 2021, a penalty of AED 10,000 remains unsettled. The tax registrant settles 30% of the penalties unsettled (i.e. AED 3,000) but did not settle all payable tax. In this case, the registrant is not eligible for tax penalty determination in the UAE due to the failure to settle all the payable tax. As a result, the registrant is required to pay the remaining AED 7,000 of the tax administrative penalties.

How can Jitendra Chartered Accountants Help you?

The UAE’s new cabinet decision represents a great change to the country’s penalty regime for tax violations. Tax consultants in Dubai, UAE consider this amendment will help taxable businesses and also encourage taxpayers to voluntarily correct previous VAT declarations. However, to make the process of VAT redetermination Disclosures much easier, the taxpayers need the assistance of the Approved TAX AGENT (vat consultants) in Dubai such as Jitendra Chartered Accountants (JCA).