Habib Al Mulla & Partners, a member firm of Baker & McKenzie International successfully represented a global e-commerce company in a series of appeals filed against administrative penalties imposed by the Federal Tax Authority (“FTA“) in connection with delayed payment of VAT due. The UAE Federal Supreme Court recently dismissed an appeal filed by the FTA to impose administrative fines and penalties against the company, and ordered that the FTA to repay the full amount of the penalties to the company.

Habib Al Mulla & Partners, a member firm of Baker & McKenzie International had also successfully represented the company at all stages of the dispute resolution process: before the Court of Appeal, Court of First Instance, and Court Appointed Experts. Both the Court of First Instance and Court of Appeal had also rejected the FTA’s appeal against the decision of the TDRC, and allowed the company’s counter appeal against the decision of the TDRC (in doing so, both Courts held that no penalties should be due based on the court experts’ findings).

The Federal Supreme Court held that the administrative penalties were imposed on the incorrect premise that the company was late in paying the due tax, as the delay mainly stemmed from the FTA’s failure to share the correct transfer details for payments from abroad, as published by the FTA at the relevant time.

The company had, in this case, taken all necessary steps to communicate with the FTA and the Central Bank to address the issue. After the lapse of a considerable time, the matter was resolved and payment was received by the FTA. Nonetheless, given the lengthy delay before the company was able to obtain the required details to make the payment, significant delay penalties were assessed by the FTA on the company.

The company therefore took all the necessary legal procedures to challenge the administrative penalties imposed before the competent courts.

The Court, in this case, deemed that the decisive factor in the matter was the actual date for enabling the company to transfer the due tax amount according to the details provided by the FTA, which is the date the Central Bank amended the details (in order to correct the transfer details provided by the FTA). That then enabled the company to complete the transfer process. These facts were confirmed by the opinion given by the court appointed expert as mandated by the court.

The UAE legislature has also adopted this approach (which the Court concluded in the present Case) in Cabinet Resolution No. (105) of 2021 concerning the Controls and Procedures of the Administrative Penalty Waiver and Installment, as Article (4) of this Decree stipulated that: “The administrative penalty waiver shall be applied if the following condition is met: … E. There is a general defect in the Authority’s systems, payment systems, or used telecommunications services, whenever this is a direct cause of a group of persons’ failure to implement tax duties on their time.”

This judgment sets a final and conclusive precedent that could be very relevant in the consideration of several ongoing tax challenges, including any other taxes. It establishes a clear principle pertaining to the appropriate conditions for the “waiver of administrative penalties”.

The Federal Supreme Court’s relevant reasoning is set out in the Annex hereto.

Challenge process

These judgments confirm the robustness of the UAE judiciary with respect to the adjudication of tax matters, upholding taxpayers’ lawful rights to challenge the FTA’s assessment on taxes and penalties. When challenging the FTA’s assessment, taxpayers should adhere to the specific procedures and timeline for re-calculations, re-considerations and objections before the TDRC and the relevant UAE courts.

Seek legal counsel

Over the last two years, Habib Al Mulla & Partners, a member firm of Baker & McKenzie International 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. The matter was led by senior lawyer Mohamed El Baghdady who specializes in 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.

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, members of our UAE Tax Litigation team.

This alert is prepared by Mohamed El Baghdady (Senior Associate, Tax Litigation, Dubai).

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Dr. Habib Al Mulla is the Executive Chairman of Habib Al Mulla & Partners, a member firm of Baker & McKenzie International 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).


Mohamed El Khatib is the UAE Head of the Litigation practice of Habib Al Mulla & Partners, a member firm of Baker & McKenzie International, 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.


Mohamed El Baghdady is a senior associate in the Dispute Resolution Practice Group of Habib Al Mulla & Partners, a member firm of Baker & McKenzie International, 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.


Reggie Mezu is a Senior Counsel in Baker McKenzie's Tax Practice Group based in Dubai. He specialises in corporate tax and has practiced tax for nearly 30 years, including in the UAE for 15 years. Reggie advises on corporate direct and indirect tax matters, with particular focus on cross-border and transactional work across the Middle East and Africa. He concentrates on tax aspects of corporate and business structures and also regularly participates in various initiatives aimed at enhancing the tax regimes of developing countries.


Bastiaan Moossdorff is a Senior VAT Adviser in Habib Al Mulla & Partners, a member firm of Baker & McKenzie International, based in Dubai. He specializes in indirect tax and has practiced indirect tax for more than 7 years in the Netherlands, the UK, the UAE and the KSA. Bastiaan has multi-jurisdictional and multi-disciplinary academic qualifications in law, accountancy and taxation.


Ben Phillips is a senior associate in Baker McKenzie and has a general focus on international tax and mergers & acquisition matters. Ben has over 10 years' experience in the UAE and UK and has advised on matters across the UAE, GCC and globally across this period. More recently, Ben has had a specific focus on the introduction of the Pillar One and Pillar Two initiatives announced by the OECD.

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