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In brief

The UAE Federal Tax Authority (FTA) announced that any person or group proven to have violated the provisions of tax legislation has the right to apply to the FTA to reduce or be exempted from an administrative penalty, provided that there is an excuse acceptable to the FTA, and that there is evidence available justifying the excuse and the violation related thereto, which led to the imposition of an administrative penalty


The FTA clarified that according to Cabinet Resolution No. (51) of 2021 regarding amending the Executive Regulations of the Federal Law on Tax Procedures, any person or group whose violation of the provisions of the law or tax law is proven may submit a request to the FTA to reduce or be exempted from the penalties imposed by the FTA, according to a set of controls.

It pointed out that this set of controls are that:

  • there is an excuse acceptable to the FTA
  • there is evidence available justifying the excuse and the violation related thereto, which led to the imposition of administrative penalties
  • the person notifies the FTA of the request for the reduction or exemption according to the mechanism defined by the FTA within 40 business days of the removal of the acceptable excuse
  • the person proves that it has rectified its violation
  • the request for reduction or exemption is submitted in accordance with the form specified by the FTA

The FTA stressed that according to the amendment, which came into effect as of 28 April 2021, the excuse upon which the violation was committed, will not be acceptable if it is proven that the person committed the violation intentionally. A tripartite committee to be formed by a decision issued by the Director General of the FTA will decide whether the excuse will be acceptable. The committee will be concerned with examining, accepting or rejecting the excuse, provided that the FTA issues its decision to reduce or exempt from the administrative penalties within 40 business days as from the date of receiving the application. The non-official translation of the relevant decree is set out in the Annex to this alert.

Committees (TDRC) and Federal Courts and may also affect the existing avenues to settle tax disputes.

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Author

Mohamed El Khatib has been practicing in the UAE for over 17 years. He has extensive experience in litigation and dispute resolution across a variety of industries and areas of UAE law. Mr. El Khatib was recommended for insurance disputes by the Legal 500 in 2014.

Author

Habib Al Mulla is the chairman of Baker McKenzie's Habib Al Mulla, has over 32 years’ experience in UAE law and has drafted many of Dubai’s modern legislative structures. His practice focuses on litigation and arbitration. He has been lead counsel on numerous UAE and international arbitrations across a variety of sectors including construction, finance, commerce and maritime, as both counselor or expert witness. He is experienced in many arbitration rules including the DIAC, the Abu Dhabi Conciliation and Commercial Arbitration Centre (ADCCAC), the ICC, the LCIA and the ICSID.

Author

Mohamed El Baghdady is an Associate in Baker McKenzie's Dubai office.

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