Tax Administrative Penalties Waiver & Payments of Penalties in Instalments

A new guideline has been issued by virtue of a Cabinet Decision No. 105 covering the controls and procedures related to the waiver and instalment of administrative penalties which comes into effect on 1 March 2022. An independent Committee will be formed to review and provide necessary approvals pertaining to the applications submitted for requesting a waiver of penalty or payment of administrative penalties in instalments.

The approval of requests to pay administrative penalties in instalments is subject to the fulfilment of the following conditions:

• The instalment request must be in respect of unpaid penalties only;
• The amount of penalties subject to instalment should not be less than AED 50,000;
• Penalties subject to instalment should not be currently disputed in front of the Tax Disputes Resolution Committee (TDRC) or Federal Courts or any other bodies (excluding the reconsideration process);
• The tax due for the tax period subject to the instalment request is settled.

However, with respect to the waiver requests, a more stringent and limited scenarios are covered which specifically excludes any penalties relate to tax evasion cases.

The cases that considered for reviewing the waiver requests includes death, illness or resignation of a key persons in the business which caused a direct reason for non-compliance of the tax obligation. Further, any Precautionary measures and restrictions imposed by Government Authorities or any defect of payment system or telecommunication services of the Federal tax Authority (FTA) caused a direct reason for non-compliance also consider as valid reason for reviewing such waiver requests by the Committee. However, the approval amount of the administrative penalty waiver request is up to the discretion of the Committee.

Procedures to submit a request for waiver or payment in installments:

The request for either an installment or waiver request shall be submitted to the FTA through the form developed by the FTA for this purpose. Apart from the general information, Cabinet Decision 105 mandates that the person should submit an undertaking which should state that penalties will be paid in accordance with the payment schedule that is accepted by the Committee and for waiver requests, and undertaking which should state that the cause of the penalties shall be rectified and the same cause shall not occur again.

It should be noted that, a person cannot file more than one application for the same administrative penalties under consideration.

With respect to timelines, FTA has 40 business days to review the application. If the request is valid and meeting the requirements, it shall be referred to the Committee. The Committee has 60 business days to decide on the request submitted and FTA will inform to the person within 10 working days from the date of issue of the Committee’s decision.

Taxpayer should note that the lack of response from the Committee within the stipulated timeline as mentioned above is deemed as refusal of the request.

This Cabinet Decision also stipulates the control and measures to be adopted for refund of the administrative penalties which was already settled by the tax payer in the past. Upon review of the request submitted by the taxpayer, Committee will determine the penalties approved for return as well as the reasons for return. It should be noted that Committee will only look into the return of administrative penalties collected within 5 years before the date of consideration of its return.

If paid penalties are decided to be returned to the person, it will be credited to the taxpayer’s account within 90 business days or refund in cash in case the taxpayer has cancelled their tax registration.

MBG’s Comments

Cabinet Decision 105 stipulates a strict documentation procedures for submitting a request for payment of penalty in installment or request for waiver. With respect to waiver application, there should be genuine reasons that are directly linked to the non-performance of tax obligation in time. Any misunderstanding of the requirement or lack of awareness of documentation may lead to denial of benefit under this Decision. Therefore, it is important to validate and review the procedures and documents related to the request prior to the filing of the same.

Do you need any help in submitting the request for paying the penalties in installments or need assistance in submitting the request to waive the penalties?

Get in touch with our team today to find out all you need to know about the requirements.

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