The Federal Tax Authority (FTA) introduces administrative penalties installments and waivers as per Cabinet Decision no. 105 of 2021 on the Procedures of Administrative Penalty Installments and Waivers.
The decision is effective from 1st March 2022.
Summary of Cabinet Decision no. 105 of 2021
Administrative penalties installments
The FTA introduces a new scheme that allows taxpayers to settle the tax administrative penalties through installments.
Where a taxpayer wishes to settle their administrative penalties through an installment plan, a request should be submitted to the FTA, and the FTA will approve such requests when all of the following conditions are met:
- The request is submitted for unpaid penalties only;
- The unpaid penalties requested for installments is not less than AED 50,000;
- Tax amounts related to the administrative penalties submitted for installments should be completely paid;
- The unpaid penalties requested for installments shall not be disputed in front of the Tax Dispute Resolution Committee (TDRC) or the Federal Court.
Administrative penalties waivers
The FTA has also introduced the administrative penalty waiver scheme under which a separate request shall be submitted to the FTA. The FTA may approve the request and grant the penalty waiver under the following conditions:
- Administrative penalties submitted for waiver shall not be related to tax evasion cases.
- Penalty waiver requests shall be submitted within the timeframes instructed by the FTA.
- The applicant’s request may be related to any of the following:
- The death or sickness of the authorized signatory or the sole owner of the company, where death or sickness is a main reason that the company is unable to settle the tax administrative penalties.
- Death, sickness, or resignation of a key employee whose absence has led to the inability of settling the penalties.
- Introduction of restrictions, precautionary or preventive measures by local governmental bodies that led to the inability of settling the penalties.
- Proof that a failure has occurred in the payment or communication systems of the FTA, which led to an inability to settle penalties.
- Proof that the tax administrative penalty has been issued because of a restriction of liberty or freedom of the sole owner or the authorized signatory.
- Proof that all tax dues have been paid as per VAT law, but from the tax portal of another registrant.
- Where the taxpayer has declared bankruptcy and all tax dues and payments related to the period before going bankrupt have been cleared previously, and that insolvency or bankruptcy is not for the purpose of tax evasion.
Procedure for application submissions
· Penalty installment and waiver requests should be submitted to the FTA and include the following information:
- Applicant’s name and related information, including email and communication address points.
- Tax registration number, if applicable.
- Penalty amount and type of violation.
- Date of penalty issuance.
- Reason for application submission.
- A declaration to settle the required payment, where the application relates to the penalty installment plan, and the request has been approved by the FTA.
- Where the application relates to the penalty waiver – a declaration to confirm that the tax violation has been rectified and no violation shall occur again.
· An applicant is not permitted to submit the same application more than once.
The FTA shall take up to 40 working days to review the penalty installment and waiver requests from the date of submission, a further 20 working days to issue its decision based on the review, and another 10 working days to inform the applicant of its decision. Where no communication is received from the FTA within the timeline, the request will be considered rejected.
The FTA shall be responsible for assigning the installment plan that it may believe to be reasonable, along with obtaining a payment guarantee (i.e., bank guarantees or other guarantees), where the penalty installment request has been approved and where the FTA may believe that a payment guarantee should be provided. The FTA shall have the right to amend approved penalty installment requests where the applicant fails to settle an installment on time.
Moreover, the FTA shall also be responsible for assessing the penalty percentage that should be waived, where the penalty waiver request has been approved.
The decision also mentions that the FTA shall be authorized to set the circumstances and rules in respect of the waiving of penalties previously paid (within the last 5 years). Where a penalty waiver request has been approved and the penalty has been paid, the waived amount shall be credited into the tax registrant portal or returned in cash if the taxpayer is no longer registered for tax purposes.
KPMG has a team of experienced tax specialists that can help you assess your current tax position, advise on the appropriate tax treatment, prepare clarification requests, or represent you in front of the FTA as registered tax agents.
We are happy to discuss your specific circumstances with you and determine the way forward should you have any questions or concerns in this regard. Please get in touch with your usual KPMG contact or any of the tax professionals below.