In the UAE, taxable persons who have been subject to administrative penalties can now request a waiver or instalment of penalties to the authorities. Taxable persons who wish to be benefited from the new law should ensure that the conditions described are satisfied before submitting a request to the committee for instalment or waiver of administrative penalties.
The law was issued on 28 December 2021 describing the controls and procedures related to the waiver and instalment of administrative penalties that will come into effect on 1 March 2022. Following conditions must be met to get the approval of requests to pay administrative penalties in instalments:
- The instalment request must be in respect of unsettled penalties only
- The amount of penalties subject to instalment should not be less than AED 50,000;
- Penalties subject to instalment should not be currently disputed in front of the Tax Disputes Resolution Committee (TDRC) or Federal Courts (excluding the reconsideration process);
- The tax due for the tax period subject to the instalment request is settled.
- In order to get the approval of requests to waive administrative penalties, it is important that the penalties should not be associated with tax evasion cases.
- Requests for Settlement of Administrative Penalties by instalments or Waiver of Administrative Penalties shall be submitted to the Authority in the forms prepared by the Authority and should contain the following information:
- Name and information related to the Person, including email and correspondence address
- Tax registration number (TRN), if applicable
- The amount of Administrative Penalties and violations relating to the Request
- Date of imposition of the Administrative Penalties subject of the Request
- Reasons for submitting the Request
- Attaching an undertaking by the Person to settle the required payment in accordance with the Administrative Penalties instalment plan approved by the Committee, in case the request relates to the Settlement of Administrative Penalties by instalments
- Attaching an undertaking by the person that the person has corrected the violation and undertakes not to repeat the violation, in case the request relates to the Waiver of Administrative Penalties
- The Person shall not make more than one request for Settlement of Administrative Penalties by instalments or Waiver of Administrative Penalties in respect to same Administrative Penalties under review
Reasons to grant penalty waivers:
The request should be related to any of the following cases:
Death or illness of the taxpayer if the taxpayer is a natural person or owner of an establishment.
Death, illness, or resignation of a key employee of the tax registrant.
Evidence of restrictions, precautionary or preventive measures, applied on the taxpayer by UAE government agencies.
Evidence of system failure of the Federal Tax Authority (FTA), or payment and communication systems failure that affects a class of persons.
Causes relating to restrictions on liberty and freedom of a natural person taxpayer or owner of an establishment.
Payment of all taxes through the tax account of another registered taxpayer.
In cases of insolvency or bankruptcy, penalties may be waived if they have been paid before the insolvency or bankruptcy and if it is evident that the insolvency or bankruptcy was not for purposes of tax evasion.
What is the Timeline for the request?
The FTA has 40 business days to review the request for compliance with all requirements. If the request is valid, it shall be referred to the Committee. The Committee has 60 business days to decide on the request and 10 days to notify the applicant thereafter. The lack of a decision is deemed as a final rejection.
The Committee will be responsible for:
Setting the time limit for filing waiver requests.
Draw the payment procedures and schedules for instalment requests.
Decide the percentage of penalties to be waived in respect of waiver requests.
Request any guarantee it sees fit to process an instalment request.
Retrospective penalty refund
The committee is granted the power to apply the rules in respect of paid penalties within the previous 5 years. If paid penalties are waived retrospectively, the paid penalties subject of the waiver will be credited to the taxpayer’s account with the FTA within 90 business days or refunded in cash, in case the taxpayer has cancelled their tax registration.
The Committee may revoke the decision to pay by instalments in case of non-payment and may take the following actions:
Specify a new plan for the Person, if the Person has submitted the reasons for non-payment, and such reasons were accepted by the Committee.
To direct the Authority to take the necessary legal actions to collect the Administrative Penalties.
