Tax Procedures Law Update

The UAE has announced a full update of the Tax Procedures Law, with the publication of Federal Decree-Law No. 28 of 2022 on 30 September 2022. This will revoke and replace Federal Decree-Law No. 7 of 2017 on Tax Procedures, with effect from 1 March 2023.

This update comes hot on the heels of the recent changes to Federal Decree-Law No. 8 2017 on Value Added Tax (the VAT Decree-Law) and appears to be part of a major overhaul of the UAE’s tax legislation.

The changes are listed below in the order they appear in Decree-Law No. 28. Please note, we have not included minor changes to wording that will not affect most taxpayers.

New Clause	Clause in current Procedures Law	Effect of the change
Article 1 Definitions	Article 1 Definitions	Some of the definitions have been updated including, Legal Representative and Tax Auditor. In addition, there are new definitions for Business Day, Tax Residency Certificate and Tax Resident.
Article 5 Language	Article 5 – Language	Article 5 covers language. There are some general changes to the wording of Article 5 and a new clause (3) has been added confirming that the person providing documents translated into Arabic will be responsible for the accuracy and validity of information, will bear all associated costs, and the FTA will be entitled to rely on such document
Article 9 Allocating Payable Tax Upon Settlement	Article 9 Determination of Payable Tax	This Article deals with the allocation of payments made to the FTA. Some changes have been made to the wording to give the FTA additional rights to make allocations.
Articles 12 to 15 Tax Agents	Articles 12 to 16 Tax Agent	These changes deal with Tax Agents. The principles applied to the appointment of agents remains largely the same but the Articles have been redrafted and a new Article 13 has been inserted to cover registration, suspension of registration and deregistration.
Article 16 The Right of the Authority to Perform a Tax Audit	Article 17 The right of the Authority to perform a Tax Audit	This Article concerns Tax Audits. There have been some small changes to the wording and a new clause (2) has been added that provides that the FTA must give a notification at least ten days before the audit commences. Previously, this was five days.
Article 23 Notification of the Tax Audit Results	Article 24 Notification of the Tax Audit Results	This Article deals with Tax Assessments. There have been general changes to the wording and in addition, clause (1) confirms the FTA must notify the Taxpayer within ten days of issuing certain types of assessment.
Article 24 Administrative Penalties Assessment	Article 25 Administrative Penalties Assessment	This Article deals with Administrative Penalties Assessments. The amended Article confirms that administrative penalties can also be levied on tax agents and legal representatives.
Articles 25,26,27 Penalties, Procedures and Measures	Article 26 Penalties	This part of the legislation applies to tax evasion. In the new Articles this is referred to (in the heading) as 'Tax Crimes'. The Articles have been rewritten and are much more detailed than before. Important changes include a reduction in the maximum monetary penalty for certain crimes from five times the amount of tax evaded, to three times the amount. In addition, prison sentences or a monetary penalty not exceeding AED 1,000,000 (or both) can be applied for certain violations. There are also new clauses dealing with general procedures and settlements in connection with tax evasion.
Articles 28 to 37 Review of Assessment, Objection and Appeal	Article 27 to 33 Objections	These are provisions relating to the review of assessments, objections and appeals. Generally, the principles of these processes remain the same, however, the provisions have been significantly redrafted, updated and restructured. 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.
Articles 38 and 39 Refund and Collection of Tax	Articles 34 and 35 Refund and Collection of Tax	This concerns tax refunds. These articles have been rewritten and Article 39 (previously 34) includes a new sub-clause (2.b) that, subject to conditions, the FTA should not retain a refund payable to a taxpayer undergoing a tax audit.
Articles 40 to 43 Collection of Tax	Articles 37 to 40 Settlement and Collection of Tax and Administrative Penalties in Special Cases	These Articles relate to the collection of tax and penalties. The update includes new clauses in Article 40, numbered (2), (3), and (4), which allow assets to be seized if there is a risk that the payable tax will be lost.
Article 46 Statute of Limitation	Article 42 Statute of Limitation	This is related to the Statute of limitation. The recent changes to the VAT Decree-Law included a revision of the statute of limitation for tax audits, assessments and voluntary disclosures. A similar change has been included in the new Article 46 of the procedures Law. The relevant statute of limitation is now as follows: (a) The normal five- year statute of limitation will not apply if the FTA has notified the taxable person of the commencement of an audit and the audit is completed within four years from the notification. (b) The statute of limitation will be extended by one year if the taxable person submits a voluntary disclosure in the fifth year. (c) A taxable person cannot file a voluntary disclosure more than five years after the end of the relevant tax period.

Our comments

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. We recommend that all taxpayers review their past declarations to establish whether corrections should be made. Once the deadline has passed, voluntary declarations are not possible and potential refunds of overpaid tax 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.

If you have any queries regarding this, or any other tax matter, please get in touch with our tax team or your normal BDO contact.

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