“The Federal Tax Authority (FTA) has recently released the Cabinet Decision No. (74) of 2023 on the Executive Regulation of Federal Decree Law No. (28) of 2022 on Tax Procedures (´´New Executive Regulation´´) on 28th July 2023, which hasrepealed Cabinet Decision No. (36) of 2017 on the Executive Regulation of Federal Decree Law No. (7) of 2017 on Tax Procedures and its amendments (“Previous Executive Regulation”).

In relation to the amendment, the FTA has also issued public clarification “TAXP006- on Issuance of a New Tax Procedures Executive Regulation.”

The new Executive Regulation was published in the official Gazette and will be effective from 1 August 2023.

The major amendments in the new Executive Regulation read with above mentioned public clarification can be summarized as below:

  1. Definitions – The definition of the term assets has been expanded to include intangibles such as patents, brands, licenses, trademarks, computer programs, copyright, goodwilland also customer lists.

PKF CommentsBybroadening the definition of assets to include intangibles, the FTA has increased its scope in terms of its rights to seize and retain intangible assets in terms of Article 18 of New Executive Regulation.

  1. Record Keeping– Businesses must retain all documents that support entries in the accounting records and commercial books of the business including tax invoices, licenses and agreements related to the business, related party transactions and transfer pricing documentation.
  2. Period of Record Keeping – The period of retention of documents shall be as follows:
  • In case of real estate records, the retention period is 7 years from the end of the calendar year in which the record or document was created.
  • The general document retention period of 5 years will be extended by 1 year starting from the date of submission of voluntary disclosure in the fifth year from the end of the relevant tax period.
  • Legal representatives are required to retain the required books and records of the person they are representing for a period of 1 year from the date on which such legal representation ends.

PKF CommentsExecutive Regulations on VAT Decree Law prescribes real estate records to be retained for 15 years. Accordingly, Executive Regulation on VAT Decree Law is likely to be aligned with provisions of New Executive Regulation on Tax Procedures Law.

Further, it is advisable to keep all the records for 15 years sincein the case of tax evasion/non-registration for Tax purposes, the FTA may conduct a Tax Assessment within 15 years from the end of the tax period.

  1. Language – The FTA may now accept the tax return, data, information, records and any other documents related to tax in English or Arabic.The requirement to translate the submissions into Arabic shall be submitted only if sought by FTA.
  2. Tax Registration and Deregistration amendments – The list of instances in which registrant is required to notify FTA of changes to their business data has now been expanded to include change in:
  • e-mail address,
  • trade licence activities,
  • legal status and partnership agreement for unincorporated partnerships.

Further, the FTA may, at its discretion, deregister a person where the person is required to deregister for a specific tax type but fails to submit a deregistration application. This may include the following instances:

  • Continuous submission of NIL Returns for Excise Tax;
  • Non satisfaction of voluntary registration threshold limit for VAT registration;
  • Cease to manufacture or import excise goods.

Further, UAE licensing authorities are required to notify FTA within 20 business days of any issuance or renewal of a number of data regarding the license.

PKF CommentsThe new Executive Regulations has cast responsibility on the licensing authority to notify FTA even upon renewal of details in respect to license. Earlier, it was specified to be notified only on issuance of license.  The given requirement is in addition to the existing obligation cast on the registrant to notify FTA within 20 business days in respect of any change in terms of its details kept with the authority.

  1. Submission of Voluntary Disclosure– TheFTA had amended the provisions of Voluntary disclosure w.e.f. 01 March 2023 vide amendment of Tax Procedures Law by adding a new instance that “if the Taxpayer discovers an error or omission in the Tax Return submitted to the Authority, where there is no difference in the amount of Due Tax, the Taxpayer must correct such return by submitting a Voluntary Disclosure”.

The FTA has clarified the following instances which includes errors with no impact on due tax:

  • Failure to report import of services where business is entitled to full input tax recovery;
  • Error in emirate wise reporting of supplies in Box-1 of VAT Return.

PKF Comments– Besides error in emirate wise reporting and failure to report import of services, itappears that error in reporting zero-rated supplies and exempt supplies may also be required to be corrected by submitting a voluntary disclosure.

  1. Means of Notification–The FTA can now notify the person throughtext messages on mobile phones, notifications through smart applications, and notifications through the FTA’s electronic systems.It has been clearly specified that a verbal agreement will not be in line with the New Executive Regulations.
  2. Tax Agents – The New Executive regulation provides the legal framework for the system of tax agents as follows:
  • Criteria to become a tax agent in terms of education and relevant tax, accounting or legal experience has been updated.
  • It is no longer a requirement for the tax agent to be able to communicate in both Arabic and English, as fluency in either of these languages is acceptable. Further, submission of proof that the person is medically fit to perform the duties of profession is not required.
  • Members of Tax Dispute Resolution Committee (TDRC) are not allowed to be registered as tax agents.
  • A new concept of a judicial person tax agent has been added to the UAE tax legislation. A juridical tax agent must meet certain requirements to become tax agent.
  • The new executive regulation states the detailed procedure for listing and delisting tax agents.Tax agents are required to meet continuing professional development requirements and retain information, documents, records and data in respect of any person the tax agent represents.

PKF Comments The relaxation of proficiency in Arabic to become a tax agent will encourage more English-speakingtax professionals to become tax agent and provide a level playing field.

  1. Notice of Tax Audits – The FTA is now required to give a person at least 10 business days’ notice before conducting a tax audit.

PKF Comments Earlier, no time limit was prescribed to give notice before conducting a tax audit. By prescribing minimum number of days, it will help taxpayers tocollate the necessary details and documentation in order to prepare for the tax audit to be conducted by the FTA.

  1. Reconciliation in Tax Evasion Crimes– A person may submit a reconciliation application to the FTA before initiation of the criminal case, provided that the person undertakes to settle the full amounts of payable tax and administrative penalties to the FTA as consideration for the reconciliation.
  2. Extension of deadlines– New timelines have been prescribed by the New Executive Regulation as follows:
  • The FTA may extend the deadline for deciding on a tax assessment review request and a request for reconsideration, for a period of 20 days,if the extension is necessary to decide the request.
  • The TDRC may extend the deadline for deciding on a tax objection request for a period of 60 business days, if the extension is necessary to decide on the objection.
  • In case of bankruptcy,the FTA shall notify the appointed trustee of any taxes due or the initiation of tax audit within 20 business days after being notified of the trustee’s appointment.
  1. Effective date of the New Executive Regulation – The new executive regulation shall come into effect from 1 August 2023 except the clause for juridical person tax agent which shall come into effect on 1December 2023.

[Source: https://www.tax.gov.ae/en]

How can PKF help?

Businesses in the UAE must imbibe thetax regulations and establish for themselves a tailor-made tax-oriented business system. PKF UAE brings world-class capabilities and high-quality service to clients helping them to align their working model to government reporting and compliance requirements.

Contacts

You may email us or can contact any of our team members relating to your queries on this subject:

Stany Pereira
Managing Partner
stany@pkfuae.com
Shailesh Kumar
Director- Tax Services
skumar@pkfuae.com
Mradul Gupta
Senior Manager
mgupta@pkfuae.com
Desh Deepak
Assistant Manager
deshdeepak@pkfuae.com
Megha Lohia
Assistant Manager
mlohia@pkfuae.com
  Chitransh Kanungo
Assistant Manager
ckanungo@pkfuae.com

Disclaimer:

This document is prepared by PKF UAE to provide general information on certain aspects of the UAE’s Corporate Tax law. It is not an official interpretation or comprehensive analysis. For authoritative information, it is advised to rely on official publications from the UAE Ministry of Finance and Federal Tax Authority. This document has been prepared as a general guide. It is not substitute for professional advice. Neither PKF UAE nor its partners or employees accept any responsibility for loss or damage incurred as a result of acting or refraining from acting upon anything contained in or omitted from this document. If you wish to be included on the regular mailing list for this newsletter, forward your request and a mailing address to Ms. Greeta Creado, P O Box 13094, Dubai, UAE.

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