Federal Tax Authority: Enhancing Fiscal Responsibility and National Development
Tax Disputes Resolution: The federal taxation system serves as a cornerstone for national improvement and fiscal responsibility. Revenue generated from taxes paid by residents enables governments to invest in initiatives aimed at enhancing the welfare of their nations. In the United Arab Emirates (UAE), the Federal Tax Authority has implemented a comprehensive federal taxation framework, further aligning the nation’s financial strategies with global standards.
Introduced in 2018, the Value Added Tax (VAT) has become a crucial component of the UAE’s taxation system. Compliance with timely tax payments is mandated for all residents, underscoring the importance of fulfilling one’s fiscal responsibilities.
At the corporate level, federal taxation in the UAE contributes significantly to the nation’s economic objectives. It not only provides essential funding for the national budget but also cultivates a more sustainable and equitable environment for residents. By effectively utilizing tax revenues, the UAE is better positioned to develop infrastructure, support social services, and create a prosperous future for its people.
Tax Compliance and Procedure Law
The Tax Compliance and Procedure Law serves as the regulatory framework for conducting audits, identifying tax evasion, and imposing penalties. This legislation aims to facilitate the United Arab Emirates government’s scrutiny over the fiscal conduct of corporations. The law prescribes guidelines for both citizens and governmental bodies, ensuring adherence to the policies and regulations set forth by the Federal Tax Authority (FTA).
Tax Audits
The primary responsibility of the Federal Tax Authority (FTA) is the execution of tax audits. To accomplish this task, the FTA employs specialists proficient in both Arabic and English, ensuring the audit process is conducted with the highest level of expertise. It’s important to note that the FTA has the authority to audit any individual or entity, irrespective of whether they hold a registration number. The overarching goal of these audits is to verify compliance with federal tax laws.
Audit Notification and Business Closure Procedures
The FTA is obliged to notify the concerned individual or organization at least five days prior to the commencement of an audit. Should it be deemed necessary for the integrity of the audit process, the FTA has the authority to temporarily suspend business operations for a period of up to 72 hours. Such a closure is only sanctioned upon approval from the Director General of the FTA. Additionally, the suspension period can be extended beyond the initial 72 hours, provided that the public prosecutor grants approval.
What Occurs During a Tax Audit Conducted by the FTA?
During a tax audit, the Federal Tax Authority (FTA) will obtain either original records or certified copies for examination. The FTA also holds the authority to seize assets of the business or company under scrutiny. This may include taking stock inventories and conducting analytical tests on them. Both the individual being audited and their designated tax agents are permitted to be present throughout the audit process.
Throughout the audit, the FTA ensures strict compliance with all tax-related laws and regulations. It is imperative that businesses promptly provide all requested records when asked by the FTA.
Tax Assessments
The FTA conducts assessments based on the following criteria:
- Registration status of the individual or business
- Payment of due taxes
- Submission of tax returns
- Accuracy of submitted tax returns
- Presence of any tax evasion or payment shortfalls
Administrative Penalties
Individuals or businesses failing to meet any of the tax assessment criteria may be subject to penalties imposed by the FTA. Administrative penalties start at AED 500 and will not exceed three times the amount of the unpaid tax. In severe cases, the penalty can escalate to up to five times the unpaid tax amount.
Dispute Resolution Options
Request for Reconsideration
If you believe that the FTA’s decision is unjust or contains errors, you may file a request for reconsideration. This application must be submitted within five days following the FTA’s decision. A ruling on your application will be made within 20 days, and you will be notified within five days of this ruling.
Tax Disputes Resolution Committee (TDRC)
If you wish to have the FTA’s decision reviewed, you can approach the Tax Disputes Resolution Committee (TDRC). The committee operates independently of the Ministry of Finance and falls under the jurisdiction of the Cabinet and the Ministry of Justice. Reviews by the TDRC are generally completed within 20 days.
Judicial Appeal
Decisions by the TDRC involving amounts less than AED 100,000 are considered final. For disputed amounts exceeding this threshold, you have the option to file a judicial appeal within 20 days of the TDRC’s decision. The court’s decision on the appeal will be final and cannot be challenged further.
Consult Expert VAT Advisors in UAE
For additional information and guidance concerning VAT and tax disputes in the UAE, you may consult with MP Elites Consulting. We are always here to assist you in navigating the complexities of UAE tax laws and regulations.
