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An Overview of Tax Compliance & Litigation Procedure in the UAE

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Taxation is the primary source of income for the state. Compliance with tax laws is far too important to keep the state's system working and to provide programmes that improve the lives of all people. Tax compliance is being aware of and adhering to federal and state rules governing tax filing and return services. Tax returns must be filed on time to avoid legal implications and consequences from the tax authority. The FTA (Federal Tax Authority), founded in 2016, is in charge of taxation in the UAE. The government has implemented taxation laws for tax filing procedures and services for business owners. The Tax Procedures Law (Federal Law No. 7 of 2017) is enacted to establish a framework for the FTA to perform tax audits, evaluate tax evasion, impose administrative fines and assess payable tax. Get in touch with tax compliance and advisory services if you want any external guidance.

A Brief Explanation on Litigation & Tax Compliance Procedures

The corporations will face the repercussions for failing to comply with UAE tax laws. Companies must be enrolled with the FTA in order to submit tax returns on its website. In the UAE, there is a specific procedure for administrative and litigation penalties for individuals who do not follow the tax regulations. If an individual performs business in the Emirates and does not keep the required tax documents and other data specified in the Tax Law, they will be fined 10,000 Dirhams for the very first time. If he does it again, he will need to pay a penalty of 50,000 Dirhams.

When a tax applicant fails to submit their tax return in a timeframe specified by the Tax Law, they will be penalised 1000 Dirhams for failing to meet the deadline. The fine for submitting inaccurate tax filings is AED 3,000 Dirhams the first time and AED 5000 if it happens again. In the event of a tax disagreement between the payer and the FTA, the taxpayer must first apply for review. The following step is to file an objection with the TDRC (Tax Disputes Resolution Committee). If the taxpayer's tax and fines exceed AED 100,000, they may submit an appeal to the Federal Court.

Taxpayers require the assistance and counsel of qualified tax attorneys in order to pursue tax litigation. To avoid fines, taxpayers are advised to pay taxes during the timeframe specified in the FTA, irrespective of whether the individual agrees with the FTA. After obtaining the FTA notification, the taxpayer can submit the Application for Reconsideration at FTA within 20 days. The application must be submitted in Arabic on the FTA site and include the taxpayer's reasons for requesting a decision review. If the petition for review meets all requirements, the FTA will inform the taxpayer of its judgement within 25 days of receiving it. If the FTA cannot resolve their disagreement through the review process, the payer may file an objection with TDRC.

A UAE-registered management consultancy firm, Fortius Consulting helps businesses remain compliant with UAE corporate laws. We employ the best methods to reduce UAE tax liability and optimize your tax filings. Join us for expert tax advice and planning for your business.

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Conditions for Taxpayers to File an Objection Against FTA as Suggested by Tax Compliance and Advisory Services

The following are the conditions under which a taxpayer may file an objection against an FTA decision to the TDRC:

  • The payment of penalties and taxes that are the subject of the objection
  • When the taxpayer files an application for reconsideration with the FTA
  • Filing an objection in less than 20 business days of receiving notice of the decision from the FTA.

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The taxpayer must file a reconsideration application before an objection with the TDRC. He cannot register an objection unless he has exhausted his right to request reconsideration. The TDRC has the power to pronounce an objection presented regarding the FTA's decision on the application for reconsideration. TDRC can rule on objections filed against an application for reconsideration to FTA that has yet to be decided by FTA.

The TDRC has the authority to hear complaints, and its decision is final if the total amount of outstanding Tax Penalties imposed under the tax legislation's provisions legislation does not surpass 100,000 Dirhams. In such a circumstance, the TDRC's judgement is equivalent to a judicial order, which the courts' execution department will implement. The taxpayer is obliged to submit a reason to object to his TDRC jurisdiction, which is determined by the taxpayer's registered address with the FTA; for instance, the payer registered with a Dubai address in UAE will approach the TDRC, similarly for the payer from the TDRC Abu Dhabi, and TDRC Sharjah.

Processes Followed by Tax Compliance and Advisory Services in Submitting an Appeal to TDRC

There is a specific process for submitting an appeal to the TDRC, which is:

  • Get the objection application from the Ministry of Justice's website.
  • Fill out the form in Arabic. It includes the applicant's and legal representative's information, information about the FTA's decision, and so on.
  • Submit documents such as the fines subject to the objection, explanatory memorandum of the objection, the FTA's decision, and receipt of payment of the tax along with the objection form.
  • The objection application and any related paper should be delivered via email in Arabic language and PDF format.
  • When the TDRC Secretary receives the objection, he confers with the members of the committee and sets a meeting for deliberation.
  • The Secretary of the TDRC informs the FTA and the payer of the dates of the sessions and the TDRC's judgements on the objection.

Last But Not Least

The TDRC must notify the payer of its decision on the complaint within 25 business days, but this period can be extended to 45 business days. If any party, either the taxpayer or the FTA, is dissatisfied with the TDRC's decision and the amount of tax and penalties exceeds AED 100,000, they may file an appeal in the court within twenty business days of the TDRC's decision. While any party to the case decides to appeal the judgement of the Court of First Instance, it will automatically have the right to submit the claim in the appeals. The appeals process can take up to a year or more. Contact Fortius Consulting Services, one of the best business consulting services for tax-related services.

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