FTA introduced Cabinet Decree No 105 outlining the procedures for administrative penalty installments and waivers. This new cabinet decision went into effect on 1st March 2022. The scheme allows taxpayers to settle administrative penalties through installments under defined conditions and eligibility criteria.

Here are the highlights of the decision:

Penalties installments:

Taxable persons can apply for installments of penalty if the following conditions are fulfilled:

• The request is submitted for unpaid penalty only.
• The amount of unpaid penalty is not less than AED 50,000.
• The unpaid penalties are not currently disputed in front of the Tax Disputes Resolution Committee (TDRC) or Federal Courts.
• Taxpayers must completely pay the due tax for the tax period for which the installment is requested.

Penalties waiver:

The FTA also introduced the administrative penalty waiver scheme under which a separate request can be submitted to the authority. As per the law, the taxable person can apply for waivers of penalty if the following condition are met:

• Penalty waiver requests are not to be associated with tax evasion cases.
• Waiver requests must be submitted within the timeline specified by FTA.

Taxable persons can submitpenalty waiver requests in any of the following cases:

• Death or illness of the taxpayer or owner of an establishment.
• Death, illness, or resignation of a key employee of the tax registered business.
• Proof of restrictions or preventive measures, applied on the taxable by local government authorities.
• Proof of communication or payment system failure on part of FTA.
• Causes relating to restrictions on freedom of the taxpayer or owner of an establishment.
• Proof that due taxes were paid, but from the tax account of another tax registrant.
• In case of insolvency or bankruptcy, penalties may be waived if all due taxes were cleared prior to the the existing situation and that the insolvency was not for the purpose of tax evasion.

Application of installment or waiver of penalty:

The request for either an installment or waiver of penalty must include the below details:

• Applicant’s name, email and communication address
• Tax registration number
• Total penalty amount and type of violation
• Date of penalty issuance
• Reason for penalty waiver/installment request

The taxable person must make a declaration stating that the penalties will be paid in accordance with the payment schedule accepted by the Committee (for installment requests) or state the cause of penalties shall be rectified and never repeated again (for waiver requests).

Note: An applicant is not permitted to submit the same application more than once.

Timeline

If all the above conditions are fulfilled, the FTA may take up to 40 working days to review the installment or waiver requests from the date of submission, a further 20 working days to issue its decision post review, and another 10 working days to inform the taxable person.

Note: If there is no reply from the committee it means the request was rejected.

Role of the FTA committee

• Determine the time period for waiver request to be made.
• Assess the installment system and decide the payment plan and dates.
• Request further details from the taxable person and decide how much fine can be waived.
• Decide the percentage of penalties to be waived in respect of waiver requests.
• Request any guarantee it sees fit to process an installment request.

Failure to pay

If the taxable person fails to pay the installments in a timely manner, the committee can anytime amend the approved installment plan or cancel it altogether.

Refund of penalty

– The committee is authorized to set the circumstances and rules in respect of penalties previously paid in the last 5 years.

– Where a penalty waiver request has been approved and the penalty has been paid, the amount will be credited to the taxpayer’s account with the FTA within 90 business days or refunded in cash if the taxpayer has canceled their tax registration.

Contact our Tax Experts

Should you have any queries on tax related matters in the UAE feel free to clarify your questions or concerns in this regard. Our experienced tax professionals can help you analyze your current position, advise on the appropriate tax treatment and help you abide by all regulations.