The Federal Tax Authority (FTA) has revised penalties by issuing Decision No. 49/2021 (New Resolution), amending provisions of Cabinet Decision No. 40/2017 (Old Decision) regulating tax penalties imposed for the violation of Tax Laws in the UAE.

Cabinet Decision No. 49 of 2021 provides for the ability to redetermine penalties imposed before its effective date (i.e. before 28 June 2021) This decision is applicable on all administrative penalties imposed as per Cabinet Decision No. 40 of 2017 whether in respect of tax procedures, VAT or Excise Tax.

To benefit from the redetermination, all of the following conditions have to be met:

• Any of the administrative penalties have been imposed before the effective date i.e. before 28 June 2021;
• The person has not settled all the administrative penalties imposed on it in full before 28 June
• The taxable person has undertaken all of the following:
  • Settled all payable tax, i.e. (not the administrative penalty imposed) the registrant shall ensure that by 31 December 2021, no payable tax is still outstanding whether such tax was payable before or after 28 June 2021, and that all such amounts have been received by the FTA by 31 December 2021; and
  • Settled 30% of the total unsettled administrative penalties were imposed before 28 June 2021,   no later than 31 December 2021.

Where the above conditions are met, the FTA will, at   the   end   of   2021 redetermine the penalty payable and  the Person shall not be required to pay the  remaining part (i.e. 70%).

Example 1:

At beginning of April 2021, a penalty of AED 12,000  was imposed on a Registrant as per Cabinet Decision No. 40 of 2017. The Registrant settled AED 2,000 of this penalty on 15 April 2021. On 28 June 2021, AED 10,000 penalties remain unsettled. The Registrant settled all payable tax including that relating to the last return due in 2021 and 30% of the penalties unsettled (i.e. AED 3,000) by 31 December 2021.

In this case, the Registrant qualified for redetermination, and the FTA redetermined its penalties. Consequently, the Registrant will no longer be required to pay the remaining AED 7,000 of the administrative penalties, and the administrative penalty imposed before 28 June 2021 shall equal AED 3,000 that was already settled by the Registrant.

Example 2:

At beginning of April 2021, a penalty of AED 12,000 was imposed on a Registrant as per Cabinet Decision No. 40 of 2017. The Registrant settled AED 2,000 of this penalty on 15 April 2021. On 28 June 2021, AED 10,000 penalties remain unsettled.

The Registrant settled 30% of the penalties unsettled (i.e. AED 3,000) but did not settle all payable tax. In    this case, the Registrant does not qualify for redetermination as it has not settled all payable tax. Consequently, the Registrant is still required to pay the remaining AED 7,000 of the administrative penalties.

Source: FTA website