Key takeaways from new Decision on UAE Tax Procedures Law
The Federal Decree-Law No. 28 of 2022 on Tax Procedures (“Decree-Law”) and its Executive Regulation govern the tax procedures in the UAE. The Ministry of Finance recently released the Cabinet Decision No. 74 of 2023 introducing many new provisions that govern the UAE tax procedures. The new decision takes effect from August 1st 2023 and effectively repeals the Cabinet Decision No. 36 of 2017 on the Executive Regulation of Federal Law No. 7 of 2017 on Tax Procedures, and its amendments.
The new Decision has introduced many new provisions and retained some provisions from the older version. Additionally, the Federal Tax Authority (FTA) released a clarification (TAXP006) explaining the key changes in the new Executive Regulation. Taxable persons in the UAE need to stay updated on the latest regulatory changes to ensure they remain compliant. Tax agents in the UAE can help you understand and comply with the new provisions. Here is a list of key takeaways from the new Decision on UAE Tax Procedures Law:
Article 1: Definitions
The new Cabinet Decision has expanded the term ‘assets’ to include intangible assets. The definition of assets now includes patents, brands, licenses, trademarks, computer programs, copyrights, goodwill and also customer lists. Taxable persons need to make sure that they refer to the definitions in the Decree-Law in conjunction with the provisions of the New Executive Regulation.
Article 2: Accounting records and commercial books
Article 2 of the Decision states that businesses, in addition to the records and books of the business, need to retain all documents that support entries in the accounting records and commercial books of the business. This includes but is not limited to the following:
- Relevant correspondence, invoices and tax invoices, licenses and agreements/contracts related to the business
- Documents containing details of any election, determination or calculation made by a taxable person in relation to its tax affairs, including the basis, method of estimation, determination made and calculation performed
- Documents with respect to related party transactions and with respect to the circumstances under which such transactions were made, including, for example, transfer pricing documents
Article 3: Period of record keeping
Businesses need to keep all accounting records, commercial books and all documents and information in such a manner that the FTA should be able to carry out its tax audits and verify a person’s compliance with the tax obligations. The companies must also maintain the records defined periods depending on whether a person is a taxable person or not or depending on the nature of the record or document.
Tax consultants in Dubai are the right persons who can help you sort out your record-keeping challenges. The following are the key takeaways from Article 3 of the Cabinet Decision No 74 of 2023:
- 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.
- The general document retention period of five years will be extended by one year starting from the date of submission of 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 one year from the date on which such legal representation ends. The retention periods under Article 3(1) and (2) of the New Executive Regulation remain applicable when a person has been appointed a legal representative and will continue to apply in the event that legal representation ends for that person. The period of one year is an onus on the legal representative.
Article 5: Language
The new Executive Regulation presents a stark departure from the previous one. In the previous regulation, the tax return, data, information, records and any other documents related to tax, had to be submitted, by default, to the FTA in Arabic. The new Executive Regulation states that the FTA may now accept the tax return, data, information, records and any other documents related to tax to be submitted in English or Arabic.
The FTA may, at its discretion, request to translate some or all the documents submitted in English into Arabic within a period that the FTA will specify in its request. The translation into Arabic must be approved as per the law regulating translations in the UAE, which implies the requirement of using a translator who is on the translators’ list as defined under the Federal Law No. 6 of 2012.
Article 6: Tax Registration, Deregistration, and Amendments
The new Executive Regulation has expanded the situations in which registrants are required to notify the FTA of changes to their business data to include notification of the following changes:
- E-mail address
- Trade license activities
- Legal status and partnership agreement for unincorporated partnerships
Article 7: Licensing Bodies
As per Article 7 of the new Decision, licensing bodies in the UAE are required to also notify the FTA, within 20 business days of any issuance or renewal, of a number of data regarding the license. The notification must include details such as the name of the licensee; type, number and date of issuance of the trade licence; registered address of the licensee; description of the activities of the Business; details of the owners, partners and directors; any other information requested by the FTA.
Article 10: Voluntary Disclosure
If the taxpayer identifies any error or omission in the tax return submitted to the FTA that did not impact the due tax for that tax period, the person is required to submit a voluntary disclosure to rectify the error. Errors with no impact on the due tax include:
- Failing to report imported services, where the business is entitled to full input tax recovery in respect of the supply
- Reporting supplies in Box 1 of the VAT return against an Emirate other than the Emirate in which supplies should have been recorded
Article 11: Means of Notification
The means by which the FTA notifies a person now include text messages on mobile phones, notifications through smart applications, and notifications through the FTA’s electronic systems. The person and the FTA should agree on any other means of notification than the ones listed in the Cabinet Decision in writing. A verbal agreement is not in line with the New Executive Regulation.
Article 12: Tax Agents
With the introduction of corporate tax, the system of tax agents in the UAE has undergone certain changes. The new updates are related to specialism, experience required, education, registering as natural vs. juridical persons, language, procedures for tax agent listing and renewal and professional behaviour and integrity. As per the new Executive Regulation, the tax agent is not required to be proficient in both Arabic and English.
The FTA will now accept fluency in one of these languages. Tax agents are no longer required to submit proof that the person is medically fit to perform the duties of the profession. Moreover, members of the Tax Dispute Resolution Committee are not eligible to register as tax agents in the UAE.
Article 16: Tax Audits
Under the New Executive Regulation, the FTA is now required to give a person at least 10 business day notice before conducting a tax audit in the UAE.
Article 23 & 24: Tax Evasion Crimes
For tax evasion crimes and the intentional failure to settle administrative penalties, a person can submit a reconciliation application to the FTA before the initiation of the criminal case, if the person undertakes to settle the full amounts of payable tax and administrative penalties to the FTA as consideration for the reconciliation.
Article 25: Extension of Deadlines
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 if the extension is necessary to decide on the request.
Article 27: Bankruptcy
The FTA can notify the appointed bankruptcy trustee of the amount of the due tax in respect of the business subject to bankruptcy and, where applicable, of its intention to perform a tax audit for the specific tax period(s), within 20 business days after being notified of the trustee’s appointment.
Hire the Best Tax Agents in Dubai, UAE
Taxable persons need to have a good understanding of the New Executive Regulations before making any decisions related to VAT, Excise Tax and the UAE Corporate Tax. Tax consultants in Dubai such as Tax Gian can help you out in this process. Tax Gian is a brand of Jitendra Tax Consultants (JTC), which is a renowned tax agent in the UAE with two decades of experience. At Tax Gian, a dedicated team of tax experts will ensure your compliance readiness by keeping you updated on the latest regulatory changes issued by the FTA. Talk to our consultants for tax solutions that you can count on.