Tax reforms to help UAE beat Covid-19 challenges quickly
The UAE federal government’s decision to extend the tax notification period and reduce penalties will improve the country’s business climate and help businesses overcome Covid-19 challenges quicker, say tax experts.
The Cabinet this week amended the Executive Regulation of the Federal Law on Tax Procedures, extending the tax notification from 10 to 40 working days.
The amendment also covered the time limit for issuing the decision by the Federal Tax Authority (FTA) to reduce or exempt administrative penalties from 20 to 40 working days from the date of receiving the application.
Thomas Vanhee, partner at Aurifer Middle East Tax Consultancy, said in amending the executive regulations, the Cabinet has provided a welcome relaxation to some of the procedural rules governing the requests for waivers of penalties.
“Penalties for value-added tax purposes can go up to 356 per cent of the unpaid tax, creating very substantial liabilities for businesses which are not compliant. For excise tax, the liabilities can be even higher, given that the rates go up to 100 per cent,” he said.
Businesses voluntary disclosing their errors cannot count on a full waiver and would still have to pay 306 per cent of the unpaid tax. Under the new more relaxed rules, the Cabinet is creating a more favourable business climate which will help rebound the UAE economy after Covid-19,” Vanhee added.
Anurag Chaturvedi, chief executive officer of Chartered House Tax Consultancy, said the amendment was need of hour for the businesses that are imposed due to non-compliance of tax procedures.
“The modification of time limit for a taxable person to notify the reduction or exemption application to the FTA from 10 to 40 business days provides reasonable time to prepare applications appropriately, sighting proper fact of the cases, grounds of appeal, supporting provisions and historical records,” he said.
Chaturvedi added that responding to any administrative matter in 10 business days was a big challenge, failing which a taxpayer loses its opportunity to apply for the waiver.
He said the amendment that also allows taxpayers to respond in 40 business days instead of 20 days previously which will allow the FTA to communicate and understand the application in detail and arrive at right judgement, he added.
“Considering Covid-19 impact worldwide, most of the businesses are working remote, hence, they need additional time to prepare the application. FTA is considerate of economic situation and acts in the interest of the businesses,” said Chaturvedi.