What You Should Know About VAT/Tax Disputes in UAE

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Due to significant regulatory changes and from current releases of tax guidance/clarification by the UAE Federal Tax Authority, there’s been a substance increase with the size and number of tax audits and tax assessments. Businesses operating in the country, including self-employed professionals, face relatively ambiguous VAT rules and challenging, time-sensitive resolution procedures for tax disputes.

UAE businesses are advised to seek the assistance of regulated tax agents in Dubai like Farahat and co. They can help strategically manage your business’ interactions with the local tax authority for all phases of the life cycle of tax disputes.

How can businesses prevent tax disputes in UAE?

Some key steps which greatly help avoid tax litigation and disputes are listed below.

  1. Vet all transactions that are from VAT perspective in order to ensure full compliance with the applicable legislation and legal ‘do-ability.’
  2. Draft legal documents appropriately and vet all prospective structures in order to avoid disputes going forward. It’s important for commercial intent behind all transactions is captured immaculately in transaction documents or VAT invoices.
  3. Consider obtaining the assistance of regulated tax agents in Dubai to safeguard the business against potential tax demands and regulatory changes in the future.
  4. When undertaking local and international transactions, taxable entities should make reasonable determination with how pricing aspects are handled for transactions.
  5. Make appropriate disclosures with the business’ tax returns to bring all legal documents and relevant facts on record. This will also lay a foundation for strong defense of your position as a taxpayer or VAT-registered business entity in UAE. Done at the outset, it can also help in avoiding application of penalties when claims of the business are not accepted in the tax assessment.
  6. When undertaking a specific transaction like merger, acquisition, share sale, or slump sale, make sure that the relevant documents are preserved. This includes supporting evidence with regards to valuation of involved assets.
  7. Implement defensible and consistent practices and policies.

How can I dispute a VAT penalty?

If you don’t agree with the penalty decision that’s issued by the FTA or Federal Tax Authority, it’s possible to ask the regulatory body for VAT reconsideration. It’s a request application which can be submitted with the preparation of proper and complete case study that offers evidence or justification with why penalty shouldn’t be issued.

The FTA is responsive with applications for VAT reconsideration in UAE. Most especially so when applications are properly elaborated and explained. UAE FTA tends to offer a waiver for penalties.

How can I apply for UAE VAT penalty reconsideration with the FTA?

The application process for VAT reconsideration in UAE is both clear and practical. As laid out in Article 27 of UAE Federal Law (no 7) of 2017 related to UAE Tax Procedures, VAT reconsideration application has to be submitted within twenty business days from an applicant being notified regarding a penalty. Applications for VAT reconsideration are to be filed with the FTA and should only be in Arabic language. This includes the certifications and other documents used in providing the FTA evidence for reconsidering penalties.

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Obligatory attachments to the application for VAT reconsideration are as follows:

  • Passport copy of the authorized signatory
  • Emirates ID of the authorized signatory
  • Proof of authorization e.g. memorandum of association
  • Case study letter, including supporting documents

The FTA will appoint a representative or tax officer in order to review your request for VAT penalty reconsideration. The appointed member of the FTA will check if your application fulfilled the requirements. A justified decision will also be issued within twenty business days starting from the receipt of your application. An applicant for VAT reconsideration will be informed regarding the FTA’s decision through a notification. The applicant may be contacted via several different communication channels.

What should I do if application for VAT reconsideration is rejected?

In the event the FTA rejects the application for VAT reconsideration and both parties to a dispute aren’t able to resolve the issue through the reconsideration process, the VAT-registered business entity can submit an objection to the Tax Disputes Resolution Committee established by a Ministerial Decision.

Conditions for submitting your objection to the committee against the decision of the FTA in reconsidering a penalty are as follows:

  • Objection must be submitted within twenty business days starting from date of issuance of FTA’s decision
  • Application of reconsideration was submitted to the local tax authority and response has been given by the FTA
  • Settlement of tax or penalty is in question

Documents to furnish to make an objection with the committee include:

  • Duly completed form for objection
  • Explanatory memorandum of objection in Arabic language
  • Supporting documents including evidence of original FTA decision, application of reconsideration what was submitted to the UAE FTA and response given by the FTA

 

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