The United Arab Emirates (UAE) has published Cabinet Decision No. (49) of 2021, which amends Cabinet Decision No. (40) of 2017 on Administrative Penalties for Violations of Tax Law in the UAE. The amendments will be effective from 28 June 2021.
The amendments generally reduce the value added tax (VAT) penalties for non-compliance. The most significant change is that taxpayers will now be given time to settle underpaid taxes before late payment penalties are imposed. The variable penalties for correcting filing errors through a voluntary disclosure before the Federal Tax Authority (FTA) notifies the taxpayer of an audit have also been reduced. However, the variable penalties when a voluntary disclosure is not filed before an audit notification, have increased. Taxpayers may also benefit from a waiver of 70% of unpaid penalties if they meet certain conditions.
The amendments create an incentive for businesses to review their historic filing positions and to voluntarily disclose any errors before they are notified of an audit. Businesses should also review any outstanding penalties to determine if they can benefit from relief.
Source EY
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