The UAE Cabinet of Ministers issued Decision No. 49/2021 amending provisions of Cabinet Decision No. 40/2017 regulating tax penalties, on 28th April 2021, the effective date being sixty days from the issuance date.
LET’S REVIEW THE HIGHLIGHTS:
- Late payment penalties reduced from 1% per day to 4% per month.
- 300% cap still applies.
- New starting date for calculating late payment penalties.
- Reductions for prior penalties to be made.
LATE TAX PAYMENT PENALTIES
The most notable of the new amendments is that is that the late payment penalties have been reduced from 1% per day to 4% per month.
The new calculation of late payment penalties, (with a cap of 300%) will be as follows:
- 2% of the unpaid tax due on the day following the due date for payment.
- 4% monthly penalty due after one month from the payment due date.
PENALTIES ON VOLUNTARY DISCLOSURE
- Fixed Penalties for submitting VD’s for incorrect VAT and Excise Returns has also been reduced to AED 1,000 for First VD and AED 2,000 for subsequent VD’s.
- Further reductions or waivers also allowed in specific cases.
- Also, the percentage based penalties for difference in Tax Amounts resulting from VD’s has also been reduced.
DUE DATE FOR LATE PAYMENT PENALTY CALCULATION
The new Decision states that the due date for the purposes of calculating late payment penalties shall be:
- In the case of voluntary declaration, 20 business days from the date of its submission.
- In the case of tax assessment, 20 business days from the date of its receipt.
DISCOUNTS FOR PREVIOUS PENALTIES
The Federal Tax Authority shall define the administrative penalties imposed prior to the effective date thereof that have not been paid, so that they are equal to 30% of the total unpaid penalties, where the following conditions are met:
- Any of the administrative penalties stipulated in Cabinet Resolution No. (40) of 2017 was imposed on the Registrant and has not been fully paid.
- The registrant has paid the following:
- The due and payable tax up to 31 December 2021 at most; and
- 30% of the total payable administrative penalties unpaid until the effective date hereof up to 31 December 2021 at most.
HOW CAN MSATC HELP?
- Check the consequences of delay/late payments or errors in the VAT Returns.
- Ensure applicability of various provisions under the UAE VAT law.
- Advice on the probable liability to the Authorities.
- Suggest the best course of action in case of any liability to FTA.