In brief

The President of the United Arab Emirates, H.H. Sheikh Mohamed Bin Zayed Al Nahyan has issued the Federal Decree-Law No. (28) of 2022 on Tax Procedures (“the Amended Tax Procedures Law”) on September 30, 2022, to replace the Federal Decree-Law No. 7 of 2017 on Tax Procedures as amended by Federal Decree-Law No. 28 of 2021 (“the Tax Procedures Law”).

The unofficial English translation of the Amended Tax Procedures Law was published on 15 November 2022. We have summarized the significant changes.

Effective date

The amended provisions will become effective from March 1, 2023.

Summary of the amended provisions

 

Amended Article Summary of Amended Provisions
Article (1) – Definitions
  • The Amended Tax Procedures Law introduced new definitions: Business Day, Tax Residency Certificate, Tax Resident, and Executive Regulations.
  • Most of these definitions are already known, but this amendment allows them to be used in the amended articles of the Tax Procedures Law.
  • The Amendment of the Tax Procedures Law has a few minor additions/ clarifications/language changes to the existing definitions, e.g. under the amended definition, Tax Audit procedures now cover inspection of goods which may be relevant for the tax obligations of a taxable person.
Article (3) – Scope of Application of the Law
  • The Amended Tax Procedures Law clarifies that the provision of the law shall apply to the tax procedures related to the administration, collection, and enforcement of tax laws and administrative penalties imposed by the authority for the violation of the provisions of the Amended Tax Procedures Law and other tax laws.
Article (5) – Language
  • Clause (3) clarifies that a person who submits any translated copies of data, information, records, and any other documents related to any tax to the authority shall be responsible for the accuracy and correctness of such translated copies, and bear all costs associated with it and the authority has the right to rely on the translation provided.
Article (7) – The Legal Representative
  • The Amended Tax Procedures Law introduced two new clauses (2) and (3), which clarify that the legal representative must ensure the submission of the tax returns to the authority on behalf of the taxable person and the legal representative must comply with any requirements imposed by the Amended Tax Procedures Law and the tax laws, as the case may be.
Article (10) - Voluntary Disclosure
  • The Amended Tax Procedures Law clarifies that where the taxpayer discovers that there is an error or omission in the tax return submitted to the authority, without there being a difference in the amount of tax due, he must correct this declaration by submitting a voluntary disclosure.
Article (16) - The right of the authority to perform a Tax Audit
  • The Amended Tax Procedures Law clarifies that the authority shall inform the person of the tax audit at least 10 business days before conducting the tax audit as opposed to 5 business days as indicated in the old Tax Procedures Law.
Article (23) – Tax Assessment
  • The Amended Tax Procedures Law in Clause (1) extended the notification period to the concerned person from 5 to 10 business days to issue a tax assessment and to determine the value of the payable or refundable tax and any other matters specified in the tax law or the executive regulations. 
  • Under the introduced new sub-clause (1g), the above now also covers any other scenario applicable to the relevant tax law.
Article (24) – Administrative Penalties Assessment
  • The Amended Tax Procedures Law in clause (3) states that the Council of Ministers shall issue a decision specifying the administrative penalties for each of the violations stated in the Amended Tax Procedures Law and other tax Laws or any other violation specified by a decision of the Council of Ministers.
  • In particular, the authority has revoked the minimum penalty amount of AED 500 for any violation and revoked the penalty cap that was previously set to not exceed 300% of the amount of tax in respect of which the administrative penalty was levied.
  • The new Clause (4) states the amount of any administrative penalty shall not exceed 200% of the amount of the tax for which the administrative penalty assessment was issued.
  • The Amended Tax Procedures Law extends the application of administrative penalties for the failure to facilitate and offer assistance to the tax auditor to a person's legal representative and tax agent.
Article (25) – Tax crimes and its penalties (previously: tax evasion cases)
  • The Amended Tax Procedures Law in Clause (2) caps the application of tax evasion penalties by imprisonment and a fine that shall not exceed 3 times (i.e. instead of the 5 times cap previously).
  • A new Clause (3) states, whoever willfully refrains from paying the administrative penalties due, (unless an exemption decision has been issued), shall be punished by imprisonment and a penalty not less than the amount of the administrative penalty and shall not exceed 3 times the amount of administrative penalty, or one of these two penalties.
  • A new Clause (4) states, whoever commits any of the following acts shall be punished by imprisonment and a penalty not exceeding AED 1,000,000, or one of these two penalties: deliberately providing false information, concealing or destroying documents or other material, stealing, misusing or causing the destruction of documents or preventing or hindering the authority’s employees from performing their duties unless this has led to tax evasion which would make Clause 2 applicable (as stipulated in Clause 5).
  • A new Clause (6) states that whoever is proven to have participated directly or caused one of the crimes stipulated in the law or other tax laws, shall be punished with the penalty prescribed for it in the law in accordance with the provisions of criminal participation specified in the Decree-Law (31) of 2021.
  • Introduced Clause (7) states that if several persons are jointly sentenced to a fine, whether they are perpetrators or accomplices, both accused shall be jointly bound by it.
  • A new Clause (8) states that whoever is sentenced by a ruling and is convicted of one of the crimes and then commits another of those crimes before the lapse of 5 years from the date of the previous final judgment, it would be considered an aggravating circumstance.
  • A new Clause (9) states that any of the partnered persons involved in tax evasion shall be jointly and severally liable for paying the tax payable and administrative penalties.
  • Introduced Clause (10) states that the court may, when passing a conviction, order the publication of the judgment or its summary by the appropriate means at the expense of the convict, provided that this is based on a request from the authority to the public prosecution.
  • Amended Clause (11) states that the judgment of any penalty according to the provisions of this law or any other laws shall not exempt any person from the responsibility of paying the underlying payable tax or administrative penalties.

Article (26) - Procedures and Measures (new)

  • A new Article (26) states that a criminal case may only be brought upon a written request from the Director General.
  • In the cases in which the law requires a judgment of confiscation of seized items and funds the authority may without prejudice to the rights of third parties in good faith, carry out storage, transportation, seizure, disposal, destruction, recycling, or sale of seized items.
  • Any actions taken by the authorities related to the seizures shall not prejudice the responsibility of paying the payable tax or administrative penalties.
  • The owner of the seized goods may request their recovery after full payment of the tax, administrative penalties and expenses in certain cases and the authority shall not bear any responsibility for the damage caused to the seized items as a result of retaining them.
Article (27) - Reconciliation of Tax Evasion Crimes (new)
  • A new Article (27) states that the authority may settle the crimes of tax evasion and willful refusal to pay administrative penalties stipulated in this law or other tax laws, before prosecuting the criminal case, in return for full payment of the tax due and administrative penalties.
  • After starting the prosecution of the criminal case but before the issuance of the judgment of conviction, the authority still may settle the crimes in return for full payment of the tax due, administrative penalties but increased with an amount equal to a percentage of the evaded tax (to be further stipulated in Executive Regulations).
  • The reconciliation should result in the expiration of the criminal case and the cancellation of its effects.
Article (28) – Request a Tax Assessment Review (new)
  • The newly introduced stage of dispute resolution allows any person to submit to the authority a request to review the tax assessment issued, or part thereof, and any related administrative penalties.
  • The request must be submitted within 40 business days from the date the person was notified of the tax assessment and associated administrative penalties.
  • The authority shall review the request submitted within 40 business days from the date of the receipt of the request and notify the applicant within 5 days from the date of issuance of the decision.
  • Following the above, the person may submit a reconsideration request within 40 business days from the date on which the person was notified of the decision or from the expiry of the period during which the authority must issue a decision regarding the application for review and inform the applicant of it.
Article (29) – Application for Reconsideration
  • The newly introduced Clause (3) states that a request for reconsideration of a tax assessment to the authority may not be submitted if a request for tax assessment review has been submitted and the decision has not been issued by the authority unless the expiry of the period during which the authority must issue a decision regarding the application and inform the applicant of it has been reached.
Article (32) – Procedures for Application for Reconsideration
  • The Amended Tax Procedures Law introduced Clause (3), which states that the Council of Ministers, based on the Minister’s proposal, may issue a decision to make any amendments to the threshold amount for TDRC’s decisions to be considered as final.
Article (33) – Procedures of the Committee
  • The Amended Tax Procedures Law has revoked Clause (2) of the old Tax Procedure Law, which stated that the committee may extend the deadline for deciding on the objection for a period not exceeding 20 additional working days if it finds reasonable grounds for the purpose of deciding on the objection.
Article (35) – Extention of Timeframes (new)
  • The introduced article states that the authority or the committee may, for any of the reasons specified in the Executive Regulations, extend any of the periods for submission and review of reconsideration requests for a period specified by the Executive Regulations (including based on the person’s request).
  • In the event that the extension request submitted under specific situations is rejected, the decision of the authority or the committee shall be final and not subject to objection or appeal, as the case may be.
Article (39) – Tax Refund Procedures
  • The Amended Tax Procedures Law added a condition in Clause (1), which states that the authority shall offset the refund amounts with any other payable tax or undisputed administrative penalties before refunding any amount related to a specific tax.
  • Furthermore, two new sub-clauses were introduced, which state that the authority may refrain from refunding any amount in any of the following cases:
    • if it finds that there are other disputed tax amounts related to that taxpayer.
    • if the person is subject to a tax audit, and in this case, the authority may not refrain from returning the remaining amount unless the conditions specified by a decision of the authority’s board of directors are met.
    • pursuant to a decision of the competent court.
Article (40) – Collection of Payable Tax and Administrative Penalties
  • The introduced Clause (2) states if the authority finds that the tax amounts payable could be vulnerable to lose, the Director General may request the judge to issue an order to seize the person’s funds sufficient to collect these amounts.
  • The introduced Clause (3) states that the tax and other amounts due to the authority under the tax law shall have priority over all the funds owed.
  • The introduced Clause (4) states that any person who receives any amount as a tax must pay it to the authority, and these amounts shall be treated as the payable tax.
Article (46) – Statute of Limitation
  • Article (46) of the Amended Tax Procedures Law introduces new statute of limitations rules (i.e. similar to the one introduced recently in UAE VAT/Excise laws). Thus, the standard 5 years period may be additionally extended for the cases where:

    • The notification for tax audit was made before the expiration of the 5th  year, provided that the tax audit or issuance of tax assessment is completed within 4 years from the date of such notice
    • The audit or assessment relates to a voluntary disclosure submitted during the 5th year from the end of the tax period, provided that the tax audit or assessment is completed/issued within 1 year from the date of voluntary disclosure submission
    • The article also permits amendment of the referred periods by virtue of a separate Cabinet Decision.
    • No voluntary disclosure may be submitted after the expiration of 5 years from the end of the relevant tax period
    • In cases of tax evasion or tax registration failure, the authority may conduct a tax audit or issue a tax assessment within 15 years from the end of the tax period in which the tax evasion occurred or from the date on which the taxable person was required to perform tax registration.
Article (53) – Tax Resident
  • The new Clause (1) and (2) state that the Council of Ministers shall issue a decision (based on the decision of the Minister) according to which a person can be considered a tax resident for the purposes of the tax law or any agreement or arrangements to which the state is a party. The tax authority should be issuing the tax residency certificates in accordance with the provisions specified by the Council of Minister's decision.
Article (55) - Cancellations
  • The introduced amendments to the article set the status of the old versions of the law and executive regulation in case they contradict to Amended Tax Procedures Law, which should prevail.
Other Amended Articles: (2), (4), (6), (8), (9), (11), (12), (13), (14), (15), (17), (19), (22), (33), (36), (38), (41), (42), (45), (48), (52), (56), and (57)
  • In addition to the changes mentioned in the above 20 Articles that have been amended, His Highness has also approved amendments to 23 other articles, which upon our analysis, represent relatively minor amendments e.g. in wording.

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