The Federal Tax authority (FTA) operates using the Tax Procedures law that permits the FTA to assess payable taxes, tax audits, determine tax evasion and issue administrative penalties. These tax assessments as stated can result in a decision to make the taxpayer pay penalties pertaining to a particular transaction or tax period.
Reasons for possible FTA penalties can include:
- The person not being registered as required by law.
- Incorrect tax returns submitted.
- Failing to submit a tax return.
- The person pays some tax but not all arousing the suspicion of potential tax evasion.
- Intentionally failing to settle payable tax or penalty.
- Making an intentional understatement value.
- Submitting falsified information or incorrect documents to FTA.
- Withholding documents instead of submitting to the FTA.
- Embezzling documents or materials in the FTA’s possession.
- Purposefully obstructing FTA personnel from performing their duties.
Before the taxpayer can dispute the FTA fines it is required that they should pay all the FTA penalties issued. The taxpayer can pay using E-Dirham, Bank Transfer or Credit card and once paid can proceed with their tax dispute resolution process.
Read more: How to appeal for VAT penalties in UAE?
Method to resolve the Tax Dispute
Step 1: Application for Reconsideration.
The taxpayer starts by submitting an ‘Application for Reconsideration’ directly to the FTA.
For this to be valid:
- The submission has to be made within 20 business days of the FTA’s decision (shown on the FTA’s decision notification)
- Legitimate reasons why the decision should be reconsidered must be provided by the taxpayer. Legislative references should also accompany these reasons.
- The submission to the FTA to be in Arabic as English not accepted. To application should be submitted through the FTA public website.
With all information correctly submitted the taxpayer will get the verdict within 25 business days from receipt of the application.
Step 2: Tax Disputes Resolution Committee(s) (TDRC)
In the event of the taxpayer and the FTA not reaching an agreement the next option open to the taxpayer involves submitting an objection to a Tax Disputes Resolution Committee (TDRC.) This TDRC operates outside the jurisdiction of the Ministry of Finance and chaired by judges governed by the Cabinet and Ministry of Justice.
To do make this objection to the TDRC the following steps must be taken:
- All taxes and penalties to date must be paid.
- The taxpayer’s ‘Application for Reconsideration’ should be in the possession of the FTA.
- The objection needs to be made within 20 business days.
- A completely filled out TDRC Objection Form.
- All supporting documentation such as:
- Proof of the original FTA decision
- The ‘Application for Reconsideration’ submitted to the FTA
- Responses given and
- Evidence of payment of all taxes and penalties born from the FTA decision
Should be Included.
The TDRC will then consider and decide on the matter within twenty days. They can extend this time in certain cases.
Step 3: Judicial Appeal
Amounts less than 100,000 AED are considered as final rulings. If the amount exceeds 100,000 AED an appeal can be made in the Federal courts of Abu Dhabi within 20 business days of the decision from the TDRC. The cases are heard in the courts of Abu Dhabi since the courts Dubai and Ras Al Khaimah do not use the Federal court system.
You may want to know: Why Islamic Finance Disputes are Best Resolved via International Arbitration?
Farahat and Co. have registered tax consultants in Dubai UAE You can get more information and guidelines regarding VAT and tax disputes. However, You can always take help from us and follow the rules and regulations in the UAE.