Federal Tax Authority to Refund Fees for Private Clarification Requests

On 19th July 2024, the UAE Federal Tax Authority (FTA) introduced a new policy to refund the fees for private clarification vide FTA Decision No. 5 of 2024, declared effective from the 1st of August 2024. This decision simplifies and improves the previous regulation of fees for private clarifications, indicating under which conditions a refund can be made.

Also know about Excise Tax Registration

Understanding Private Clarification Requests

Private clarifications are a service offered by the FTA whereby taxable persons or entities can seek an interpretation of particular tax provisions. These requests are essential in making sure that the taxpayers understand their roles and responsibilities in contributing to the government revenue as required by the law. However, there are scenarios whereby the Federal Tax Authority (FTA) may opt not to issue the clarification. In such cases, this new decision opens the door to a fee refund possibility.

Also read: Audit Requirements in UAE

Refund of Service Fees for Non-Issuance of Private Clarification

As per Article 1 of the Federal Tax Authority Decision No.5/2024, where the FTA has not issued clarification or refused to clarify, then it will be a case of refunding the paid fee for a private clarification application. 

• Full Refund: If the private clarification request is made to one tax or more taxes and no clarification is provided, the full fee charged is refundable.
• Partial Refund: If a request involves many taxes and if a clarification is issued for one tax only, then a part of the fee will be returned. This portion is arrived at from the comparison of the service fee for the multi-tax clarification and the single-tax clarification.

Eligibility for Refunds

Article 2 of the decision details specific cases where a refund may be applicable:

1. Withdrawal of Request: If the application withdraws the private clarification request within two business days of the submission of that request.
2. Non-Registered Applicants: If the request is not made by a Corporate Tax registrant and where the subject matter of the request is other than tax registration.
3. Coordination with the Ministry of Finance: If the request pertains to a subject covered under the FTA’s ongoing consultations with the Ministry of Finance for the amendment of the tax laws.
4. Tax Audit Situations: She/he is under a tax audit by the FTA at the time of filing the request.
5. Duplicate Requests: If the request meets the condition that it is a request on the same subject and documents that were also requested by the same applicant.
6. Procedural Clarifications: In particular, the request should state whether it pertains to procedures that should be implemented by official entities due to an FTA decision.

Refund Process

The refund process for private clarification requests is structured to ensure efficiency and transparency: 

1. Application Submission: Based on the previous findings, applicants are required to send their refund request through the FTA online portal – Emaratax.
2. Documentation: Any course request for a refund must be backed by availed payments and information of the initial clarification made.
3. Processing Time: The FTA usually takes a specific period to complete refund request processing, and this time will be provided by the FTA to the applicant upon his or her application.

Important Considerations

Accuracy of Information: It is recommended that the details given in the refund request should be accurate and all the necessary details should be included so that there may not be a hold-up on the part of the government agency.

Communication: The Federal Tax Authority (FTA) may contact the applicant for further information or further clarification in the course of processing the refund.

Updates: Refund requests from the Applicants must check their Emails and FTA portal frequently for updates on the status of the refunds.

Fees for Private Clarification Requests

The fees for submitting a private clarification request are as follows:

• AED 1,500: For a request linked to one tax type only.
• AED 2,250: If the request is associated with different taxes.

Historical Context and Previous Updates

Earlier, on March 13, 2023, the UAE released the second Cabinet Decision after the CIT law launch. Cabinet Decision No. 7 of 2023 regulates Cabinet Decision No.65/ 2020, for the fee to be paid by taxes to request a private ruling from TA, starting from June 2023. For one tax the fees were fixed at AED 1,500 whereas for more than one tax it was fixed at AED 2,250.

The Role of Private Clarifications

Private rulings are therefore very essential in assisting businesses and taxable individuals to appreciate their tax obligations. The FTA provides these clarifications as official signed and stamped documents to particular inquiries that it receives. If the FTA fails to respond to the request with a clarification then the fees may be held and returned to the taxpayer.

The Guide on the FTA’s usage, procedure, and requirements was unveiled in December 2022 and includes a User Guide (USEG001) on Private Clarifications. As pointed out by the guide, applications can be made by the form’s endorser, the person or their authorized signatory, who is seeking clarification in respect of his business. The applications can be submitted through authorized tax agents, and legal counsels/representatives.

Implementation and Future Updates

The latest refund policy shall take effect starting August 1, 2024. It will be disseminated to the public in the Official Gazette and implemented starting from this date. The new provisions should be studied to prevent non-compliance and when possible, to be able to claim refunds.

Therefore, the FTA continues to provide clear direction and assistance to taxpayers so that the taxation system in the UAE is appropriate and comprehensible. Prospective future changes in tax laws and regulations are also expected by the FTA to alter its policies and procedures in line with the requirements of the business society.

Conclusively, taxpayers are advised to seek the expert services of trusted Tax Consultants in the UAE to effectively ensure compliance with statutory tax laws and requirements. Thus, contact Farahat & Co., a reputable Tax Consultant in UAE and we shall be glad to assist you.