UAE FTA Public Clarification TaxP004 (replacing TaxP002) including practical examples!

The FTA published a new Public Clarification (TaxP004) that replaces the previously published TaxP002).


This Public Clarification provides detailed information on the redetermination of some of the penalties already imposed. Details relating to the amendments to administrative penalties in accordance with the First Article of Cabinet Decision No. 49 of 2021 have been discussed in the Tax Procedures Public Clarification “TAXP001 - Amendments to the Penalties Regime”, available on the FTA’s website.


Summary

Cabinet Decision No. 49 of 2021 provides for the ability to redetermine penalties imposed before its effective date (i.e. before 28 June 2021) where the penalties were imposed according to Cabinet Decision No. 40 of 2017 and certain conditions are met. This decision is applicable on all administrative penalties imposed as per Cabinet Decision No. 40 of 2017 whether in respect of tax procedures, VAT or Excise Tax.


Cabinet Decision No. 108 of 2021 extends the period within which a registrant can benefit from the penalty redetermination (31 December 2022).

Example 1: At beginning of April 2021, a penalty of AED 12,000 was imposed on a Registrant as per Cabinet Decision No. 40 of 2017. The Registrant settled AED 2,000 of this penalty on 15 April 2021. On 28 June 2021, AED 10,000 penalties remain unsettled. The Registrant settled all payable tax including that relating to the last return due in 2021 and 30% of the penalties unsettled (i.e. AED 3,000) by 31 December 2021. In this case, the Registrant qualified for redetermination, and the FTA will redetermine the penalty within 30 business days from 31 December 2021. Consequently, the Registrant will no longer be required to pay the remaining AED 7,000 of the administrative penalties, and the administrative penalty imposed before 28 June2021 shall equal AED 3,000 that was already settled by the Registrant. Example 2:

At beginning of April 2021, a penalty of AED 12,000 was imposed on a Registrant as per Cabinet Decision No. 40 of 2017. The Registrant settled AED 2,000 of this penalty on 15 April 2021. On 28 June 2021, AED 10,000 penalties remain unsettled. The Registrant settled 30% of the penalties unsettled (i.e. AED 3,000) but did not settle all payable tax. In this case, the Registrant does not qualify for redetermination as it has not settled all payable tax. Consequently, the Registrant is still required to pay the remaining AED 7,000 of the administrative penalties.


Example 3: In December 2019, an administrative penalty of AED 15,000 was imposed on a Registrant as per Cabinet Decision No. 40 of 2017. The Registrant settled AED 1,000 of this penalty on 11 November 2020. On 28 June 2021, AED 14,000 penalties remained unsettled. The Registrant settled all payable tax including the tax that related to the last return due in 2021 and 10% of the penalties unsettled (i.e. AED 1,400) by 31 December 2021. In this case, the Registrant did not qualify for the redetermination by 31 December 2021 as less than 30% of the outstanding penalties were paid. However, the Registrant settles the remainder of the 30% of the penalties imposed before 28 June 2021 on 25 March 2022 (i.e. AED 2,800). The Registrant also settles all payable tax including that relating to the last return due in 2022. Hence, the Registrant qualifies for the redetermination, and the FTA will redetermine the penalty within 30 business days from 31 December 2022. Consequently, the Registrant will no longer be required to pay the remaining AED 9,800 of the administrative penalties, as the re-determined administrative penalty which was imposed before 28 June 2021 shall equal AED 4,200, and this amount was already settled by the Registrant


Example 4:

In May 2020, an administrative penalty of AED 24,000 was imposed on a Registrant as per Cabinet Decision No. 40 of 2017. The Registrant settled AED 4,000 of this penalty on 21 September 2020. On 28 June 2021, AED 20,000 penalties remain unsettled. The Registrant did not settle all payable tax in 2021 nor have the Registrant settled 30% of the penalties by 31 December 2021. In this case, the Registrant did not qualify for the redetermination by 31 December 2021. However, the Registrant settles, within 2022, all payable tax including that relating to the last return due in 2022 and 30% of the penalties imposed before 28 June 2021 on 15 July 2022 (i.e. AED 6,000). Hence, the Registrant qualifies for the redetermination, and the FTA will redetermine the penalty within 30 business days from 31 December 2022. Consequently, the Registrant will no longer be required to pay the remaining AED 14,000 of the administrative penalties, as the re-determined administrative penalty which was imposed before 28 June 2021 shall equal AED 6,000, and this amount was already settled by the Registrant.


See the pdf document below:

TAXP004 - Redetermination of Penalties - 25 01 2022
.pdf
Download PDF • 500KB

TaxP002 (the replaced one) can also be downloaded from here:



TAXP002 - Redetermination of Penalties - 25 05 2021-
.pdf
Download PDF • 457KB



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