The UAE has introduced a new Tax Procedures Law which comes into effect on March 1, 2023. This law lays down all the key rules related to the administration, collection and enforcement of taxes like Value Added Tax (VAT) and Excise Tax in the country.
It is critical for all businesses to understand what this new Tax Procedures Law entails and how they can ensure compliance. In this blog, we simplify the key aspects of this law to help you stay updated.
Scope of the New Tax Procedures Law
The Tax Procedures Law regulates all taxes in the UAE, with a specific focus on federal taxes like:
- Value Added Tax (VAT)
- Excise Tax
- It outlines rules related to:
- Tax registrations and deregistration’s
- Filing tax returns and payments
- Maintaining records
- Tax audits and assessments
- Tax refunds
- Tax appeals
- Tax offenses and penalties
Thus, VAT-registered businesses must gear up to meet the new compliance criteria under this law.
Key Tax Authorities and Their Roles
The Federal Tax Authority (FTA) will be the main governing body to administer taxes under the new law.
Key roles of FTA:
- Issuing tax registrations
- Processing tax returns and refunds
- Conducting tax audits
- Levying fines for non-compliance
The Ministry of Finance will:
- Draft tax legislation and policies
Customs authorities will:
- Manage administration and collection of Excise Tax
Tax Disputes Resolution Committee will:
- Handle tax disputes and appeals
The law also introduces provisions for formally appointing:
- Tax agents
- Tax representatives
- Legal representatives
They can manage compliance responsibilities on behalf of businesses.
VAT Registrations and Compliance
- All taxable businesses with turnover over AED 375,000 must register for VAT
- Documentation required for registration includes details like business activity, bank account, partners etc.
- Registered businesses to file VAT returns monthly or quarterly
- Returns must be filed and taxes paid on time to avoid penalties
- Conditions and procedures prescribed for de-registration requests
Maintaining Proper Accounts and Records
The law mandates comprehensive account keeping such as:
- Financial statements
- Original tax invoices
- Customs documents
- Bank statements
- Other tax related records
These must be stored for at least 5 years. Failing to maintain proper records can lead to fines during tax audits.
Stringent Tax Audit Provisions
- FTA can conduct regular tax audits on registered businesses
- Financial statements, tax records and other information must be presented to auditors
- Non-compliance can result in additional tax liabilities and penalties
- The law provides clear appeal procedures against audit orders
Tax Violations and Associated Penalties
The penalties prescribed for tax offenses include:
- Fines for errors in tax returns or late filings
- Fines for not maintaining adequate records
- Deregistration of tax registration license
- Imprisonment as per court order for serious tax evasion offenses
The penalties can go up to 300% of the tax dues in cases of repeated non-compliance.
The Way Forward
The Tax Procedures Law will require substantial changes in compliance norms for VAT and Excise Tax. Some best practices include:
- Seeking guidance from tax advisors to understand requirements
- Completing tax registrations if turnover exceeds AED 375,000
- Issuing valid tax invoices and filing accurate returns
- Maintaining comprehensive tax-related records
- Staying current on the latest tax laws and procedures
Following robust compliance protocols is vital to avoid hefty fines or business disruptions.
Conclusion
The UAE Tax Procedure Law strengthens tax governance through stringent administration and compliance monitoring mechanisms. While the new provisions may seem intensive, they bring greater transparency and accountability – essential for the country’s sustainable growth.
With sound tax compliance frameworks, businesses can actually benefit from clarity on applicable tax rules and procedures. Working closely with financial controllers or tax consultants is advisable. Overall, adaptability and proactive compliance alignment will be key as the UAE enters a new era of robust tax administration.
FAQs
The UAE Tax Procedures Law comes into effect from March 1, 2023. All provisions outlined in the law, including compliance requirements and penalties, will apply from this effective date.
Errors or omissions in submitted tax returns can lead to:
Penalties of AED 1,000 per error
Higher penalties up to AED 50,000 if errors persist over consecutive tax periods
You can file an objection against the assessment order within 40 days. Provide valid reasons and supporting documents to back your tax position.
Input tax claims must be made within:
6 months from end of the tax period in which the relevant invoice or customs documents were issued.
