UAE issues new tax procedures law ahead of VAT

A new law detailing tax procedures in the UAE has been issued by the country’s President Sheikh Khalifa bin Zayed Al Nahyan.

The federal law for Tax Procedures sets the foundation for the planned UAE tax system, regulating the administration and collection of taxes and clearly defining the role of the Federal Tax Authority (FTA), official news agency WAM reported.

The law comes ahead of the implementation of excise taxes and value added tax (VAT) in the UAE from the start of 2018.

It is a follow-up step from a federal decree issued last year which established the FTA and tasked it with executing tax laws in the UAE.

The law defines a set of common procedures and rules to be applied to all tax laws in the UAE including VAT and excise tax laws, and also states the respective rights and obligations of the FTA and the taxpayer.

It covers tax procedures, audits, objections, refunds, collection, and obligations – which include tax registration, tax-return preparation, submissions, payment and voluntary disclosure rules – in addition to tax evasion and general provisions, WAM reported.

Read: VAT registration for UAE businesses to begin after June

It also establishes the register of tax agents who are allowed to interact with the FTA on behalf of taxpayers, specifies the basic requirements for appointing the tax agents, and sets the standards for maintaining confidentiality by the FTA and its officers.

Once the law goes into effect, all UAE-based businesses will be required to keep accurate records for five years.

It also sets penalties for non-compliance, as well as processes for appeals, and establishes a fair and transparent environment for the FTA, the WAM report added.

Read: UAE businesses found unprepared for VAT introduction

“The tax procedures law is a significant milestone towards establishing the UAE’s tax system and diversifying the economy,” said Sheikh Hamdan bin Rashid Al Maktoum, deputy ruler of Dubai, UAE Minister of Finance and FTA chairman.

It is an “all-encompassing legislative framework that lays the groundwork for the UAE’s plan to implement taxes as a means to ensure sustainability and diversify the government’s revenue streams,” he said.

“The increased resources will enable the government to maintain the momentum of its development and infrastructure for a better future,” he added.

Sheikh Hamdan also asserted that the UAE is committed to meeting the “most stringent international standards”.

“We are working to establish an optimal legislative and executive environment to ease the nation into the VAT and excise tax systems. Implementing these taxes gives the UAE further leverage when it comes to international competitiveness,” he said.

Provisions of the Tax Procedures Law

* The law requires any person conducting any type of business to keep accounting records and commercial books. Tax returns, data, information, records and documents must be submitted to the FTA in Arabic. The FTA may, however, accept documents in any other language, as long as the person provides a translated copy into Arabic at their expense.

* Any person obliged/eligible to register for the tax must do so, as stipulated by the law. Registrants must include their Tax Registration Number (TRN), in all correspondence and transactions with the FTA. They must also inform the authority – by filling a form – of any circumstance that might require the amendment of information related to their tax record within 20 working days.

* Each taxable person must prepare the tax return for each tax period and for each tax while being registered. They must then submit the documents to the FTA and pay the amount as specified in the tax return or any tax assessment within the time limit. The FTA reserves the right to turn down any incomplete return.

* The law mandates that a register of tax agents be established at the FTA, which will hold files for each agent documenting his/her conduct. Every tax agent in teh uEA will have to be registered to practice. Procedures for registration, and the rights and obligations of the tax agent are specified in the executive regulations of the law.

* The FTA may perform a tax audit on any person to determine their compliance with the provisions of the relevant laws. The FTA may perform the audit at its office or the place of business of the person, in which case, the person must be given a prior notice of at least five business days.

* While conducting an audit, the tax auditor may ask for original records or copies, or take samples of the goods, equipment or other assets available at the person’s place of business. The audit will be conducted during the official working hours of the FTA, however, the director general may issue a decision to conduct it outside regular hours if necessary.

* The FTA may order a re-audit if new information surfaces that might impact the outcome of the audit. Any person subject to a tax audit, his tax agent or legal representative must offer all required assistance to the auditor. The audited person has the right to: request the auditors to show their professional identification cards; obtain a copy of the tax audit notification; attend the auditing procedures that take place outside of the FTA’s headquarters; and obtain copies of any original paper or digital documents removed or obtained by the FTA during the audit.

* The FTA must issue a tax assessment to determine the value of payable tax and present it to the taxable person within five working days of its issuance in any of the following cases:

– If the taxable person fails to apply for registration within the timeframe specified by the law

– If they fail to submit a tax return within that timeframe

– If they fail to pay the tax stated as payable on the submitted tax return before the deadline

– If the taxable person submits an incorrect tax return

– If the registrant fails to calculate tax on behalf of another person when they are obligated to do so by the law

* The law also addresses issues concerning conflict of interest. It prohibits all FTA staff members from performing or participating in any tax procedures related to any person in the following cases: if the staff member and that person are related up to the fourth degree; if there is a common interest between the staff member and person or between any of their relatives up to the third degree; and if the director general decides that the staff member should not perform any tax procedures related to that person owing to a case of conflict of interest.

* Employees of the FTA are bound by non-disclosure clauses and are prohibited from disclosing information that they obtained or to which they had access to. FTA employees are also required to maintain professional confidentiality after the cessation of their services, and are prohibited from disclosing any information.