In brief

The UAE Legislator has always taken into account the obstacles and complications that may delay the ability of any sector covered by the legislations to achieve the desired results. It has also acted in line with the leadership’s keenness to create a supportive environment for businesses of different specialties, which requires the establishment of clear legislative and legal sequences in order to ensure the ability to deal effectively with the global and local economy’s developments.

In line with the foregoing, H.H. Sheikh Mohammed bin Rashid has issued a number of legislative amendments to the existing Tax Procedures Law, in addition to amendments to the Law of Insolvency for natural persons to adapt to the impact of current circumstances on insolvent persons and to ease the burden on the business sector.

The amendments encompass the following:

  • To reduce the financial burden on taxable persons in the business sector who are unable to pay penalties and ease up things for them under these circumstances, the UAE Cabinet has approved the issuance of a decision to amend the Cabinet’s resolution regarding administrative fines and penalties for violating tax laws in the UAE. The resolution also aims to encourage taxpayers to comply with taxation by correcting previous tax declarations within the voluntary declarations, as well as encouraging them to pay due taxes before the tax audit or assessment by the Federal Tax Authority (FTA).
  • With a view to facilitating administrative procedures and adding more flexibility to the legislative framework regulating these matters in a way that guarantees support for the UAE’s competitiveness in the business sector, the Cabinet has approved a number of projects to develop government laws and legislation, whereby a resolution was adopted to amend the Executive Regulations of the Federal Law on Tax Procedures.
  • According to the amendment which aims to reorganize the tax procedures to fulfill the requirements of the current period and to ensure tax compliance, the time limit for tax notification will be extended from 10 to 40 working days. The time limit for the FTA to issue its decision to reduce or exempt administrative penalties will also be extended from 20 to 40 working days starting  from the date of receiving the application.

The amendments related to the Tax Procedures Law are ought to have a huge positive impact in settling the huge controversy resulting from the judgment issued by the UAE Supreme Federal Court on 14 October 2020, concerning the imposition of penalties resulting from a voluntary disclosure, which in reality confirmed the FTA’s imposition of delay administrative penalties in case of voluntary disclosures that goes up to 300% in most of the cases.

It is very interesting to see the interplay of the recent amendments with the ongoing cases which are still being litigated before the various federal courts, especially those involving voluntary disclosures penalties.

We are currently waiting for the full decree to be issued to pursue all possible avenues for settlement of existing tax disputes either before the FTA or before the competent courts, as applicable.

Challenge process

These latest developments confirm the necessity for taxpayers to adequately consider adopting appropriate strategies before or when pursuing tax challenges before the TDRC and Federal Courts in line with any new legislative developments. Baker McKenzie Habib Al Mulla has always been successful in providing clients with a comprehensive tax and legal strategy in relation to their tax dispute and litigation matters.

Seek legal counsel

Over the last two years, Baker McKenzie Habib Al Mulla has increasingly been instructed to handle multiple first-of-its kind cases involving complex issues of VAT, excise duty, and penalties relating to tax returns and voluntary disclosures and others. Led by senior lawyer Mohamed El Baghdady who is the firm’s go-to specialist on tax litigation, we have successfully represented clients across various industries, including consumer goods and retail, services and banking and finance, before the tax tribunals and courts. Mohamed’s track record shows multiple successes achieved on behalf of a growing client base in the field of tax disputes.

We are happy to support you throughout the challenge process in relation to your taxes and penalties. For further information, please contact Mohamed El Baghdady and Reggie Mezu.

Author

Dr. Habib Al Mulla is the Executive Chairman of Baker McKenzie Habib Al Mulla and the Head of the Dispute Resolution practice in the UAE. He is one of the UAE’s most highly respected legal authorities with over 34 years’ experience in UAE law and has drafted many of the modern legislative structures in place in Dubai today. Dr. Habib focuses his practice on litigation and arbitration. He is Chairman of the CIArb (Chartered Institute of Arbitrators) UAE Committee and most recently served as Chairman of the board of trustees for the Dubai International Arbitration Centre (DIAC).

Author

Mohamed El Khatib is the UAE Head of the Litigation practice of Baker McKenzie Habib Al Mulla, based in Dubai. Mohamed has over 25 years’ experience (including over 17 years in the UAE) in litigation across a number of industries and areas of UAE law including criminal, civil, banking, corporate disputes, real estate, construction and employment.

Author

Mohamed El Baghdady is a senior associate in the Dispute Resolution Practice Group of Baker McKenzie Habib Al Mulla, based in Dubai. He is experienced across a number of specialized areas including civil, commercial and criminal law, energy and infrastructure, corporate disputes, real estate, construction, employment, intellectual property and tax.

Author

Reggie Mezu is a Senior Special Counsel in Baker McKenzie Habib Al Mulla, based in Dubai. He has practiced tax for nearly 30 years in the Middle East, Africa and Europe, including in the UAE for 15 years. Reggie regularly advises clients on tax planning, corporate structuring, cross-border transactions, double tax treaties, reform and development of fiscal frameworks, general advice, and most recently, the new value added tax (VAT) regime in the Gulf region.

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