Introduction
On 10 February 2025, the UAE’s Cabinet of Ministers (“Cabinet”) issued Cabinet Decision No. 12 of 2025 on Regulating the Procedures for the Objections and Appeals of Government Entities in Tax Dispute Resolution (“Cabinet Decision No. 12 of 2025”). This decision exercises the powers granted to the Cabinet under Article 37 of Federal Decree-Law No. 28 of 2022 on Tax Procedures and its amendments.
This article explores Cabinet Decision No. 12 of 2025, analyzing its nature, key provisions, and differences from the standard tax dispute resolution mechanism.
Background
The foundation for Cabinet Decision No. 12 of 2025 was established on 30 September 2022, when His Highness Sheikh Mohamed bin Zayed Al Nahyan, the President of the UAE, issued Federal Decree-Law No. 28 of 2022 on Tax Procedures. This law introduced comprehensive regulations for tax dispute resolution, spanning Articles 28 to 37.
A key provision, Article 37, allows an alternative mechanism for tax objections and appeals involving government entities. It states:
“As an exception to Articles 31, 32, 33, 34, and 36 of this Decree-Law, the Cabinet shall, at the Minister’s suggestion, issue a decision adopting an alternative mechanism for objection and appeal if the parties to the dispute are any of the federal or local government entities specified in that decision. Pending the Cabinet’s decision and its enforcement, the provisions of this Decree-Law shall apply to the objection or appeal of federal and local government entities concerning tax disputes.”
This provision empowers the Cabinet to implement a specialized dispute resolution mechanism for government entities, distinct from the standard process involving the Tax Disputes Resolution Committee and federal courts. Notably, Article 35, which addresses deadline extensions, remains unaffected by this deviation.
In line with this authority, the Cabinet enacted Cabinet Decision No. 12 of 2025, outlining specific procedures for how government entities handle tax-related objections and appeals.
Detailed Analysis
Article 1: Definitions
Article 1 defines key terms, with particular emphasis on “Government Entities.” This term refers to federal and local government entities listed in Cabinet Decision No. 58 of 2017 on Government Entities and their Sovereign Activities and its amendments, excluding the Federal Tax Authority. This definition establishes the scope of Cabinet Decision No. 12 of 2025, ensuring it applies only to the specified entities.
Article 2: Scope of Application
This article clarifies the scope of the decision, restricting it to:
- Objections and Appeals Only: The decision applies strictly to objections and appeals, excluding earlier stages such as tax assessment reviews or reconsideration requests.
- Exclusive Application to VAT Disputes: The decision covers only VAT-related disputes, excluding other tax types such as excise tax and corporate tax.
- Sovereign Activities: It applies solely to disputes arising from the sovereign activities of government entities listed in Cabinet Decision No. 58 of 2017, excluding non-sovereign activities.
Article 3: Jurisdiction of the Tax Disputes Resolution Committee
This article largely mirrors Article 31 of Federal Decree-Law No. 28 of 2022 but removes the provision allowing the Cabinet to assign additional jurisdictions to the committee. Given that Cabinet Decision No. 12 of 2025 is issued directly by the Cabinet, this omission ensures the Cabinet retains direct oversight over tax dispute resolution for government entities.
Article 4: Procedures for Objections and Non-Acceptance
This article resembles Article 32 of Federal Decree-Law No. 28 of 2022 but introduces a significant change. Unlike regular taxpayers, government entities are not required to settle disputed taxes before filing an objection. This safeguard ensures that public budgets allocated for essential services remain unaffected during tax disputes.
Article 5: Procedures of the Tax Disputes Resolution Committee
This article introduces two key procedural changes:
- Presumed Rejection of Objections: If the committee fails to issue a decision within 20 business days of receiving an objection, it is automatically considered rejected. This provision eliminates ambiguity regarding the status of objections.
- Expedited Decision Timeline: The committee must communicate its decision within three business days instead of five, ensuring a swifter resolution process.
Article 7: Appeal Procedures Before Courts
This article largely aligns with Article 36 of Federal Decree-Law No. 28 of 2022 but with two key modifications:
Final Settlement of Administrative Penalties: Government entities must settle administrative penalties only after a final court ruling, ensuring that public funds are preserved during the appeal process.
Tax Settlement Requirement: Unlike private taxpayers, government entities are only required to settle 100% of the tax in dispute before appealing. The requirement to pay administrative penalties upfront is removed, reducing the financial burden on government entities.
In Brief
The introduction of Cabinet Decision No. 12 of 2025 marks a significant development in the UAE’s tax dispute resolution framework, specifically designed to address the unique needs of Government entities involved in tax matters related to their sovereign activities. By providing a tailored process for objections, appeals, and court procedures, the Cabinet Decision creates a clear and structured mechanism that differentiates Government entities from regular taxpayers, ensuring a fairer and more efficient resolution of disputes.
Key provisions of the Cabinet Decision, such as the exclusion of the Federal Tax Authority, the reduced settlement requirements for Government entities, and the expedited timelines, reflect a balanced approach that safeguards public funds while streamlining the tax dispute process. Additionally, the integration of provisions from the Federal Decree-Law No. 28 of 2022 on Tax Procedures ensures continuity and consistency within the broader tax dispute framework.
While the Cabinet Decision’s application focuses primarily on Value-Added Tax (VAT) disputes concerning sovereign activities, its careful delineation of scope, coupled with the clearly defined procedures, ensures that the system remains efficient and transparent. However, the absence of transitional provisions in Article 11 may leave some uncertainty regarding the applicability of the new framework to ongoing disputes, which will need to be clarified through general principles of law.
Ultimately, this Cabinet Decision represents a significant step toward enhancing the tax dispute resolution process in the UAE, aligning it with the needs of Government entities while maintaining fairness and legal certainty across the board. As this new framework comes into effect, it is likely to set a precedent for further refinement in the UAE’s tax dispute resolution system, helping to ensure the continued smooth functioning of the nation’s public sector in its dealings with the Federal Tax Authority.
This Article is prepared by Mohamed El Baghdady, Partner, Head of Tax and Financial Crimes, and Marwan Alnooryani, Senior Tax Associate, Ameena Al Jasmi, Trainee Lawyer, and Omar Akila, Trainee Lawyer, at Habib Al Mulla & Partners Law Firm.
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For further information, please contact, Mohamed El Baghdady, Partner, Head of Tax and Financial Crimes, on mohamed.elbaghdady@habibalmulla.com.
