1). The CR 49:In a landmark move UAE Cabinet announced substantial reduction in penalties for most VAT and Excise non-compliances with up to 80% reduction for some violations. The new regulations also provide for waiver of any unpaid accrued penalties up to 70% (Article 3), subject to conditions that the tax payer settles by 31st December 2021, the 30% penalty along with 100% of unpaid VAT overdues, for any assessed VAT Liabilities until 28thJune 2021. It is unclear whether amnesty will apply for any in progress tax audits if assessments are not issued until the above date.
2). The latest Press Release announced by FTA states that any person or a group, who has been levied penalty for violation can apply for reduction/exemption, provided they have anacceptable excuse along with supporting evidence. The taxpayer has to apply to FTA for the reduction/exemption by submitting a request along with supporting evidence and satisfy the following conditions to obtain relief:-
1.There is an excuse acceptable to the FTA along with supporting evidence that justifies the existence of the excuse;
2.The request for such reduction/exemption has been made within 40 business day from the end of the acceptable excuse;
3.The Taxable person will have to prove that the violation in regard to the same has been corrected
4.The application for exemption/reduction is submitted in the FTA specified form.
An excuse shall not be considered acceptable, if the action which led to such violation was considered deliberate.
2B). Excuse Redressal process:The Director-General of the FTA shall form a tripartite committee to review the excuse and determine the excuse to be accepted or rejected. The committee shall issue a decision within 40 days from the date of receiving the application. Applicant shall be notified within 10 business days from the date of issuance.
Crowe view:It remains unclear whether the 40 days period will start from the day when the error occurred or the day when the error was identified/notified by FTA on which penalty is being levied. Further, it needs clarification whether this can be considered as additional relief from fixed penalties as levied including due to Voluntary Disclosure and or Tax Audits. Once granted, this does not mean that tax audits will not be carried out, but it may reduce the overall risk.
FTA is expected to issue detailed implementation process, forms and eligibility guidelines for availing above relief soon as some questions still remain unanswered.
3). Tax Procedures Public ClarificationPC (TAXP001) relatingto CR 49 :
3a). Amendments to the Penalties Regime:The Mechanism to specify the date of imposition of certain penalties on violations like deregistration, failure to pay the payable tax and submittal of Voluntary Disclosure has been clarified as follows:
- The date of the imposition of penalty would remain same in the current month as well as the following month. For eg; if the penalty was imposed on 1 January, the penalty in the month of February will be imposed on 1 February and each subsequent month as applicable.
- However where the following month do not have a corresponding date as of the current month, the penalty shall be imposed on the following date of the next month. For eg, if the penalty was imposed on 30 January, the penalty in the month of February will be imposed on 1 March as February does not have 30th day.
4). TAXP002clarifies the eligibility criteria forRedetermination(i.e. amnesty provisions) and requires thatallthe following conditions should be met toavail reduction of any unpaid penaltiesimposed prior to 28 June 2021:
1.The person must have not settled all the administrative penalties in full before 28 June 2021
2.No payable tax is pending by the 31 December 2021*, whether such tax was due before or after 28 June 2021
3.Settles 30% of the total unsettled penalties which was imposed before 28 June 2021 by no later than 31 December 2021.
*There should be no overdue tax payable for any period up to 31 December 2021
