The New Tax Procedure Law for UAE Corporate Taxation

The New Tax Procedure Law for UAE Corporate Taxation

Cabinet Decision No. 74 of 2023 (the Cabinet Decision) on the Executive Procedure of Federal Law No. 28 of 2022 on Tax Procedures (New Tax Procedure Law) was just issued by the Ministry of Finance.

The Cabinet Decision repeals and replaces the existing Executive Regulations on Tax Procedures, as well as incorporates new definitions, methods, and procedures following the New Tax Procedure Law. The Cabinet Decision takes effect on 1 August 2023, with the exception of Article 12(2), which addresses the conditions for registration as a Tax Agent and takes effect on 1 December 2023.

By supporting the implementation of all relevant laws, the Cabinet Decision will enhance the New Tax Procedures Law and provide taxpayers direction and assurance as they implement Corporate Tax and fulfil their tax duties while operating their businesses.

Below are the key areas with regards to the Changes in the Tax Procedures Law – Cabinet Decision No. 74 of 2023.

  • The definition “Assets” now also covers intangible assets for example such as customer lists, patents, trademarks, copy rights, software licenses etc which means now the FTA during a Tax Audit or Assessment can also inspect and seize the intangible assets.
  • The taxpayer must maintain the all the accounting records, commercial books, alongside the documentation to support the relevant entries in the accounting records. These documents comprise of the calculations, agreements, supporting which were considered as a base for election for any tax purposes, records of correspondence, invoices, licenses, contracts etc.
  • The time period for document retention has been amended for the real estate related records to 7 years. Also, new requirement for retention of documents has been added for two circumstances which are as follows:

1) In case of submission of Voluntary Disclosure (VD), Additional One year where the same was submitted in the 5th year from the end of the relevant tax period.

2) In case of Legal Representative, One year from the date of demise of the the Legal Representative.

  • The supporting documents can be submitted to the FTA in either English or Arabic, as Arabic was the default language previously.
  • The taxpayer now also needs to notify the FTA when there are any changes in the email address, trade license activities, in the legal status or in the partnership agreement of the entity.
  • In cases where the Registrant has not submitted the Tax Deregistration application, the Authority retains the right to deregister said Registrant in accordance with the procedures outlined in the law.
  • The taxpayer comes across an error or omission in the submitted Tax Return to the Authority resulting in no difference in the Due Tax paid (Eg: Incorrect Emirate Wise reporting, or non-recovery of imported services eligible for full input tax recovery) the taxpayer must submit a Voluntary Disclosure (VD) to rectify the same.
  • The FTA now may also communicate using the Text Messages on the Mobile Phones, Smart Applications, or through FTA’s electronic systems to notify the taxpayer, its Tax Agenet or Legal Representative.
  • FTA shall provide notification to the taxpayers at least 10 business days prior to the Tax Audits (Earlier it was 5 business days).
  • In cases of Tax Evasion and deliberate failure to clear Administrative Penalties, the competent Federal Public Prosecution has the authority to initiate criminal proceedings against these taxpayers. To prevent the commencement of such criminal actions, taxpayers now have the opportunity to seek reconciliation with the FTA. However, it is essential for the taxpayer to ensure that all payable taxes and administrative penalties are completely settled with the FTA prior to requesting reconciliation. Taxpayers can also submit a reconciliation to the public prosecution whenever a criminal case is instigated, but this should be done prior to receiving a conviction. Following the approval of the reconciliation and the settlement of outstanding dues, the FTA or the public prosecution will provide the taxpayer with an official record as evidence of the reconciliation.
  • The authority may extend the deadline for issuing the decision of Tax assessment review request and a request for reconsideration by 20 business days and Tax objections with the Tax Disputes Resolution Committee (TDRC) by 60 business days if necessary. Taxpayers also have the option to petition the FTA or the TDRC, where applicable, for an extension of the deadline to lodge requests or objections. To secure an extension as requested, taxpayers need to provide pertinent justifications, primarily linked to the review, reconsideration, or objection process. A valid reason could include situations beyond their control, unforeseen accidents, or emergency circumstances that prevented them from submitting their Tax objection within the prescribed timeframes.

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