On September 30, 2022, Federal Decree-Law No. 28 of 2022 on Tax Procedures was issued, replacing the previous Federal Law No. 7 of 2017. It came into effect on March 1, 2023, with hints at an impending new Executive Regulations. By July 10, 2023, these new Regulations issued under Cabinet Decision No. 74 of 2023, set to supersede previous tax procedures executive regulation starting August 1, 2023. This article seeks to elucidate the primary contrasts between the new and old Executive Regulation, aiming to equip taxpayers for upcoming shifts, fulfill new tax commitments, and capitalize on the benefits offered by the revised regulations.
Key Highlights and Amendments in the UAE’s New Tax Procedures Executive Regulations
- Article 1 of the new Tax Procedures Executive Regulation omits many previous definitions, instead referring readers to the new Tax Procedures Decree-Law, making the legislative environment simpler and more consistent.
- The term “Assets” has been expanded to include “intangible” assets, giving the UAE Federal Tax Authority (FTA) more power during audit and inspection procedures.
- Article 2 introduces numerous minor amendments to record-keeping requirements. Notably, there is now a requirement to maintain and retain “documents supporting the entries in the accounting records and commercial books”, significant in relation to the new Corporate Tax in the UAE.
- There is a new provision for record-keeping in instances where a voluntary disclosure is submitted to the FTA, requiring retention of documents for an additional year from the date of submission.
- Article 9(3) allows the FTA to “allocate the credit balance, or part thereof, to settle any amounts due to the Authority by the Taxable Person according to the seniority”. Taxable persons must be notified of this action.
- The new Regulation has a new provision on voluntary disclosures, requiring any discovered error to be corrected in the tax return of the previous tax period, rather than the one in which it was discovered.
- The FTA can now contact taxpayers through “mobile text message, smart applications or the electronic system of the Authority”, as part of a modern, digitized approach.
- Major amendments to the tax agent scheme include allowing legal persons to register as tax agents from 1 December 2023, and individuals with competency in either English or Arabic can also register as tax agents, even without a degree in tax, accounting, or law.
- Article 17 now allows the FTA to inspect “data and records stored electronically”, clarifying previous ambiguity under the old Executive Regulations.
- New provisions introduced in the new Tax Procedures Decree-Law relating to tax evasion crimes have been supplemented with comprehensive provisions in the new Tax Procedures Executive Regulation regarding applicable penalties.
- New article introduced on extension of timelines regarding disputes and the dispute resolution process.
- The former Article 26, which regulated reductions and waivers of administrative penalties, has been removed to align with the new Tax Procedures Decree-Law.
For full version of the newly enacted Tax Procedures Executive Regulations: Cabinet-Decision-No-74-of-2023-On-Executive-Regulations-of-Federal-Decree-Law-No.-28-of-2023-Tax-Procedures-Law.pdf (mof.gov.ae)
Conclusion
With such a rapidly evolving and developing tax legislative environment and constant developments, especially taking into consideration the complexities arising from such rapid development such as the extent and applicability of transitional rules, as well as measures that need to be urgently adopted by taxpayers to ensure tax compliance, it is crucial to stay up to date with all new developments and consider seeking professional advice.
While understanding and complying with the tax laws may be complex, doing so is critical for maintaining the financial health and reputation of businesses, as well as the economic stability of the UAE. If you are unsure about your obligations, it is recommended to seek advice from a legal/tax professional.
This Article is prepared by Mohamed El Baghdady, Head of Tax and Financial Crimes, and Marwan Alnooryani, Senior Tax Associate, at Habib Al Mulla & Partners Law Firm.
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