Federal Tax Authority to Refund Fees for Private Clarification Requests

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

This article focuses specifically on the refund mechanics themselves, the fee amounts, and the conditions triggering a refund. For the broader private clarification application process and reasons an application might be rejected outright, see the related articles on this topic elsewhere on our blog.

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Understanding Private Clarification Requests

Private clarifications are a service offered by the FTA whereby taxable persons or entities can seek an interpretation of specific tax provisions. These requests help taxpayers understand their roles and responsibilities in meeting government revenue requirements under the law. In certain scenarios, the FTA may opt not to issue the clarification, and this decision opens the door to a fee refund possibility in those cases.

Refund of Service Fees for Non-Issuance of Private Clarification

Under Article 1 of FTA Decision No. 5 of 2024, where the FTA hasn’t issued a clarification or has refused to clarify, the paid fee for a private clarification application becomes refundable:

• Full refund: If the private clarification request relates to one tax or more, and no clarification is provided at all, the full fee charged is refundable.
• Partial refund: If a request involves multiple taxes and a clarification is issued for only one of them, part of the fee is refunded, calculated by comparing the multi-tax clarification fee against the single-tax clarification fee.

Worked Example: Calculating a Partial Refund

A business submits a private clarification request covering both VAT and Corporate Tax, paying the multi-tax fee of AED 2,250. The FTA subsequently issues a clarification addressing the VAT question but declines to clarify the Corporate Tax question. Since the request was effectively answered as a single-tax clarification (AED 1,500 fee), the refundable portion is the difference between what was paid and what a single-tax request would have cost: AED 2,250 − AED 1,500 = AED 750. The business receives a refund of AED 750, reflecting the fee difference for the portion of the request that wasn’t actually clarified.

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Eligibility for Refunds

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

1. Withdrawal of request. If the applicant withdraws the private clarification request within two business days of submission.
2. Non-registered applicants. If the request isn’t made by a Corporate Tax registrant, and the subject matter of the request is unrelated to 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 tax law amendments.
4. Tax audit situations. If the applicant is under an active tax audit by the FTA at the time of filing the request.
5. Duplicate requests. If the request covers the same subject and documents as a prior request from the same applicant.
6. Procedural clarifications. Particularly where the request concerns procedures that official entities should implement following an FTA decision.

Refund Process

The refund process is structured for efficiency and transparency:

1. Application submission. Applicants submit their refund request through the FTA’s online portal, EmaraTax.
2. Documentation. The refund request must be supported by proof of payment and details of the original clarification request made.
3. Processing time. The FTA generally provides an estimated processing timeframe to the applicant upon submission.

Important Considerations

Accuracy of information: Details provided in the refund request should be accurate and complete to avoid delays.

Communication: The FTA may contact the applicant for further information during refund processing.

Updates: Applicants should check their email and the FTA portal regularly for status updates on their refund request.

Fees for Private Clarification Requests

• AED 1,500 for a request linked to one tax type only
• AED 2,250 for a request associated with multiple taxes

Historical Context

On 13 March 2023, the UAE issued Cabinet Decision No. 7 of 2023, amending Cabinet Decision No. 65 of 2020, establishing the fee structure for private ruling requests from the FTA, effective from June 2023. The fee was set at AED 1,500 for a single tax and AED 2,250 for multiple taxes, the same fee structure that remains in place today, with FTA Decision No. 5 of 2024 adding the refund mechanism on top.

The Role of Private Clarifications

Private rulings help businesses and taxable individuals understand their tax obligations. The FTA provides these clarifications as official, signed and stamped documents responding to specific inquiries. Where the FTA fails to respond with a clarification, the fee may now be refunded to the taxpayer under the current policy.

Applications can be submitted by the business itself, its authorized signatory, an authorized tax agent, or a legal representative, consistent with the FTA’s User Guide on Private Clarifications (USEG001), first published in December 2022.

Frequently Asked Questions (FAQs)

How Farahat & Co. Can Help

Farahat & Co., a trusted Tax Firm in UAE, assists businesses with private clarification applications and refund requests, ensuring accurate submissions to the FTA.

Contact Farahat & Co. today to discuss your private clarification and refund requirements.