That time of the year is finally here as on 1st March, 2023 when the New Tax Procedure Law of VAT Decree Law UAE becomes enforceable.
Now that the New Tax Procedures Law (TPL) has taken effect, it’s critical for businesses to familiarize themselves with its provisions.
This is a golden opportunity thanks to the New TPL’s extension of the statute of limitations for companies to conduct health checks and mock audits, review their tax and reporting history, and correct any mistakes before facing audits or assessments.
Let’s take a quick recap at the unfolding of the events to give you a clear picture, before we delve into the details.
30th September 2022
The President of the UAE, H.H. Sheikh Mohamed Bin Zayed Al Nahyan issued Federal Decree-Law No. 28 of 2022 on Tax Procedures revoking Federal Decree-Law No. 7 of 2017 on Tax Procedures which was amended by Federal Decree-Law No. 28 of 2021 (now the earlier TPL).
1st March, 2023
This new TPL has already come into effect at the start of this month.
For the uninitiated, a quick overview of what TPL UAE means.
What is Tax Procedures Law UAE?
The Tax Procedures Law (TPL) is a UAE federal law. This federal law is applicable aross the emirates and mandates the rules, procedures and provisions for administration and collection of taxes in the UAE.
It provides guidelines for tax audits, assessments, objections, and appeals, and establishes the legal framework for voluntary disclosures, penalties and fines.
It applies to all taxes imposed in the UAE including
- Value Added Tax (VAT),
- Excise Tax, and
- Other taxes introduced in the future.
The TPL is enforced by the Federal Tax Authority (FTA), which is responsible for the administration and implementation of tax laws in the UAE.
What are the changes in the New TPL 2023
Many changes have been introduced in the New Tax Procedures Law (TPL) encompassing several areas, including definitions, language, offsetting tax liabilities against tax receivables, mandatory disclosure, tax agents, notification period for tax audits/assessments, administrative penalty caps, tax refund application, revenue loss risk assessment for tax collection, monetary penalty limitations for tax crimes, statute of limitations, and dispute resolution process.
These changes have far-reaching implications for businesses and taxpayers, and this blog aims to provide an overview of the most significant amendments. Let’s take a closer look.
Definitions have been updated
Article 1
Modifications to existing definitions and new definitions have been introduced
- Tax Resident
- Tax Residency Certificate
- Business
- Business Day
- Tax Auditor
- Tax Return
- Tax Law
Arabic Translation of Legal Documents
Article 5
A new clause namely Clause (3) has been added here that stipulating that individual responsible for translating documents in Arabic is accountable for the accuracy and legitimacy of the translated text while also bearing the costs of expenses related to the translation. In addition, it is at the discretion of the FTA who will rely on this document to judge whether they consider the document fair and accurate or decide to reject it.
Payable Tax Allocation Rights given to the FTA
Article 9
In article 9 on the new TPL, FTA has been given additional rights with minor changes in the text so they get the power for further allocate payable tax settlements at their discretion.
Appointment of Tax Agents and Registration/Deregistration Protocols
Articles 12 to 16
Nearly the same as earlier TPL protocols with an additional change – article 13 includes details on registration, deregistration and scenarios where the entity can find its registration suspended.
Tax Audit Related Advance Notifications
Article 17
A new clause (2) has been added which mandates that FTA must provide at least a ten days’ notice instead of the earlier five days’ notice before they perform an audit.
Tax Audit Results Announcements
Article 24
Clause (1) of this article mandates that for a few types of assessment the FTA has to issue a notification to the taxpayer within ten days after such assessments.
Penalties on Tax Agents and Legal Representatives
Article 25
With the amendments in this article, it is now clear that your Tax Agent or Legal Represented can now be penalized in case of TPL protocol breaches.
Penalties for Tax Crimes
Article 26
Tax Crimes and Tax Evasion related penalties and information has been presented in much greater detail. Many new clauses that deal with settlement procedures and other protocols have been introduced here.
Most importantly tax evasion penalties have a revision for specific set of crimes where the penalty charged is now three times the amount of tax evaded instead of the earlier five times the evaded tax amount.
There are also prison sentences and/or monetary penalty of maximum AED 1,000,000 are now an option for specific tax crimes and violations.
Objections
Article 27 to 33
These articles cover
- Assessments
- Objections
- Appeals
The provisions related to the above three have been revised.
A new clause (28) provides a right for the Taxpayer to request a review of a Tax Assessment and related penalties within 40 business days of notification, subject to certain conditions. Other significant changes include a new provision in Article 32 (3), that the Cabinet, at the suggestion of a Minister, may amend the amount of tax to be settled in connection with an objection to the FTA’s decision. Also, the new Article 35 allows for an extension of deadlines in certain cases.
Tax Refunds and Collection
Articles 34 and 35
Extensively rewritten, these articles define in greater detail the procedures and provisions related to Tax Refunds and Tax Collection. In addition, a new sub clause has been added in favour of the taxpayer which suggests that the FTA must not retain a refund payable to a taxpayer who is undergoing a tax audit.
Tax and Penalty Settlement in Exceptional Scenarios
Articles 37 to 40
New clauses have been added here which mandate that in special cases failing to abide by the TPL, assets of a taxpayer can be seized when there is a risk of losing payable tax.
Statute of Limitation
Article 42
Revisions have been made for the Statute of Limitations for
- VAT tax audits,
- VAT assessments and
- voluntary disclosures.
The changes are as below:
- If the Federal Tax Authority (FTA) informs the taxpayer of an audit and completes it within four years of notification, the standard five-year statute of limitations will not apply.
- By submitting a voluntary disclosure in the fifth year, the statute of limitations can be extended by one year.
- After the end of the relevant tax period, a taxable person cannot file a voluntary disclosure more than five years later.
What you should know about new Tax Procedure Law 2023?
This is a very thorough update of the Tax Procedures Law. It will not affect the day-to-day tax affairs of most businesses. However, there are some important changes to the way tax audits, disputes, assessments, and penalties are administered. These changes will be of great interest to any taxpayer that has to deal with any of those matters, and will also be of great importance to their advisors or tax agents.
It is particularly important to note changes to the statute of limitation. These changes are the same as those introduced in the recent update to the VAT Decree-Law. These changes are important and all taxpayers should be aware of them, particularly the time limitations around the making of voluntary disclosures.
What you should know about Voluntary Disclosure as a taxpayer?
As a certified and experienced VAT consultancy Dubai, we recommend that all taxpayers review their past declarations to establish whether corrections should be made.
After the deadline, the chances of both voluntary declarations and potential refunds will be lost. This should be addressed urgently, as the deadline for the first returns that were made after the introduction of VAT in 2018, is approaching quickly.
The deadline for submitting a Voluntary Disclosure is five years from the end of the relevant tax period.
According to the new TPL amendments, these factors will affect Voluntary Disclosures for a taxpayer:
- The FTA now has the authority to conduct tax audits even after the five-year limit has passed.
- The penalty for submitting a Voluntary Disclosure after an FTA audit is initiated is higher due to changes in Cabinet Decision 49.
- There are chances of prison sentences as well in special cases in addition to a hefty penalty for tax evasion
More on Voluntary Disclosures as a Company Setup Dubai
This incredibly quick and short guide on how to go about VD applications related to VAT and Excise for your business is shared here by expert VAT consultants Dubai at Horizon Biz Consultancy,
How VAT Consultants Dubai At Horizon Biz Consultancy Can Help?
Horizon Biz Consultancy in Dubai advises taxpayers to take note of the recent changes made to the Tax Procedures Law.
Most taxpayers will not be affected; however, taxpayers with a history of tax audits, tax disputes, assessments, and penalties must pay attention. These changes are significant importance to them and their tax advisors or tax agents.
It is essential for taxpayers to be aware of the changes to the statute of limitation. Since time is running out, especially concerning voluntary disclosures, it is important to avoid heavy penalties in the future.
We strongly suggest you review all your past declarations and determine if any corrections are necessary before the deadline passes.
In addition, you may lose significant potential refunds of overpaid tax.
At Horizon Biz Consultancy, VAT consultants UAE we leverage our expertise across various business sectors to help your company apply for discovering errors.
In addition, we believe in walking with you every step of the way from submitting the application, to ensuring due diligence to prevent rejection of applications.
Now is your chance to VAT refunds on time and avoid potential VAT penalty exposure.
For detailed consultation on the impact of the new TPL for VAT in your organization, please get in touch with expert VAT Consultants Dubai at Horizon Biz Consultancy for a Consultation. Call us on +971 50 841 3395 now!
