The Cabinet Resolution No. 49 of 2021 (PDF 263 KB) was announced on 28 April 2021, revising the administrative penalties imposed for violations of tax laws in the UAE. The Federal Tax Authority (FTA) has released two Public Clarifications providing guidance on how this Cabinet Resolution will be implemented. Please find below links to these clarifications and some of the key points of note.
TAXP001 - Amendments to the Penalties Regime
This Public Clarification provides general clarifications about the new penalties introduced by Cabinet Decision No. 49 of 2021 (PDF 657 KB).
As we expected, this clarification confirms that the periodic percentage penalty of 4% per month is not applicable where taxpayers submit Voluntary Disclosures or, receive Tax Assessments from the FTA and pay the related tax debt within 20 business days from the submission of the Voluntary Disclosure or, receipt of the tax assessment. This represents a positive outcome for taxpayers compared with the current administrative penalty regime and provides greater support for taxpayers to manage their VAT compliance and to submit Voluntary Disclosures as early as possible to reduce penalty exposures.
TAXP002 - Redetermination of Administrative Penalties Levied Prior to the Effective Date of Cabinet Decision No. 49 of 2021
This Public Clarification (PDF 446 KB) specifies the following requirements for obtaining a 70% reduction on penalties imposed before the effective date of the new administrative penalties:
- The penalties have been imposed before the effective date of Cabinet Decision No. 49 of 2021 (i.e. before 28 June 2021)
- The taxpayer has not settled all the administrative penalties imposed on it as per Cabinet Decision No. 40 of 2017 in full before 28 June 2021 (i.e. this reduction does not apply to amounts of penalties already paid by the taxpayer)
- The taxpayer settles the following amounts by 31 December 2021: (i) all payable tax (due before or after 28 June 2021), and (ii) at least 30% of the penalties imposed before 28 June 2021
No specific procedure is provided for this penalty redetermination. The Public Clarification only mentions that where the above conditions are met (including the payment of at least 30% of the penalties imposed before 28 June 2021), the FTA will, at the end of 2021, redetermine the amount of the penalties and the taxpayer will not be required to pay the remaining part (that is, up to 70% of the amount of the penalties that is unpaid on that date).
If you would like to discuss the amendments, please get in touch with your usual KPMG contact, or any of the contacts below.