VAT Penalty waivers in UAE
The Federal Tax Authority by various mechanisms have given the taxpayer the right to apply for reduction or exemption from Tax law administrative penalties. The waiver or reduction will be at sole discretion of the FTA based on the merits of the case.
The tax team at HLB HAMT with Arabic professionals has assisted many clients in submission of penalty waiver applications stating the basis of reversal of penalties imposed, citing the relevant VAT provisions and referring updates on VAT by FTA.
The mechanisms of penalty waiver request includes:
- Reconsideration application
- Appeal to TDRC
- Application for reduction/exemption based on Cabinet Decision no. 51 of 2021
Penalty levied on a registrant by the FTA can be challenged by filing an application for Reconsideration. The reconsideration form shall be filed within 20 business days from the day a business is being notified of the decision or clarification. The reconsideration form shall be submitted in Arabic along with supporting documents.
The reconsideration application shall contain the clear subject matter of reconsideration, the relevant laws must be quoted to challenge the decision and a convincing conclusion must be drafted to address the grounds of reconsidering the decision.
Appeal to TDRC
After submission of reconsideration application, FTA may reject the submission citing invalid grounds for reconsideration. The Tax Procedures Law has given the right to taxpayer to challenge FTA’s decision of rejecting the reconsideration submission, by going to the Tax Dispute Resolution Committee (TDRC). An appeal can be filed within 20 business days of decision from FTA, with TDRC after fulfilling required conditions.
The appeal to TDRC must strongly present the valid grounds to object FTA’s stand of rejection. VAT team at HLB HAMT is well experienced with VAT scenarios across various industry segments and its corresponding regulations which helps to draft an effective appeal to TDRC.
Cabinet Decision no. 51 of 2021
Recently Cabinet Decision no. 51 of 2021 was introduced by which any person or group has the right to apply to the FTA to reduce or exempt them from the penalty imposed for the violation of the provisions of tax legislation, provided that there is an excuse acceptable to the FTA, which is supported by evidence that justifies the existence of the excuse and the violation that led to the imposition of administrative penalties. Such a request shall be submitted if below conditions are satisfied:
If the violation was deliberate, then the application would be rejected right away.
Latest insights, case studies and news from across the network
UAE VAT - Practical Difficulties Faced by Artists & Social Media Influencers | #Ep03
Artists and social media influencers have a number of practical challenges when it comes to tax compliance,
UAE VAT is Applicable to Artists & Social Media Influencers | #Ep02
Social media influencers and artists in the UAE are required to pay value-added tax (VAT) on the services they render, according to the Federal Tax Authority.
UAE VAT is Applicable to Artists & Social Media Influencers | #Ep01
In the UAE, freelance professionals, including social media influencers and artists, are required to produce tax invoices and submit periodic VAT returns.