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.
Increased penalties will now apply for voluntary disclosures made more than a year after the tax liability was declared or imposed. In addition, the variable penalties when a voluntary disclosure is not filed before an audit notification will increase. However, the overall penalties that are likely to arise under the new law should still be significantly lower than under current law because of the reduction in late payment penalties.
Taxpayers may also benefit from a waiver of 70% of penalties that are unpaid on 28 June 2021 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.