UAE - FTA issues ‘Tax Procedures Public Clarification’ on ‘Grace period to update information in tax records’

18 November 2024 – On 6 November 2024, the Federal Tax Authority (FTA) published a ‘Tax Procedures Public Clarification’ on ‘Grace period to update information in tax records’ (referred to as ‘Clarification’). The Clarification aims to provide more information on the benefit of Grace period provided through a Cabinet Decision[1], to the tax registrants to update their tax records with the FTA without incurring administrative penalties. 

Background

All the taxable persons who have been issued a tax registration number i.e., registrants, are required to inform the FTA, of any event that might require the amendment of information related to their tax record kept by the FTA, within 20 days of the occurrence of such event. Failure to do so, is considered a tax violation and is subject to administrative penalties. However, a grace period has been provided by the FTA to update the records where penalties would not be levied.

In this regard, the Clarification provides the broad mechanism of gaining benefit from the Grace Period and encouraging registrants to update their tax records with the FTA. The Clarification mentions that it states the position of the FTA and neither amends nor seeks to amend any provision of the Federal Decree-Law No. 28 of 2022 on Tax Procedures and its amendments and Cabinet Decision No. 74 of 2023 on the Executive Regulation of Federal Decree-Law No. 28 of 2022 on Tax Procedures (Executive Regulation). The Clarification is effective as of the date of implementation of the relevant legislation, unless stated otherwise.

Key Clarifications

With the above background, below is the summary of key and important takeaways from the Clarification:

Requirement as per Executive Regulation

Registrants are required to inform the FTA within 20 business days of the occurrence of any event that might require the amendment of information related to their tax records kept by the FTA, such as change of name, address, email id, trade license activities, legal entity type, nature of business, etc.

Consequences in case of failure 

Failing to inform the FTA within the prescribed period of such changes constitutes a tax violation and is subject to administrative penalties.

Related penalties:

Cabinet Decision (CD) 40 of 2017

• AED 5,000 for the first time.
• AED 10,000 in case of repetition.

Cabinet Decision 75 of 2023

• AED 1,000 for each violation.
• AED 5,000 in each case of repeated violation within 24 months from the date of the last violation.

Special dispensation provided in Cabinet Decision issued earlier 

To encourage registrants to update their records with the FTA, a grace period has been provided in which the registrants may rectify their tax records without incurring administrative penalties.

Grace Period – Starting on 1 January 2024 and ending on 31 March 2025To provide more information regarding the special dispensation for updating records with the FTA.

Objective of this clarification 

To provide more information regarding the special dispensation for updating records with the FTA.

Further Guidance as per the Clarification 

Where such penalties were already imposed during the period from 1 January 2024 until the implementation of the grace period within the FTA’s system, these penalties will be reversed.

If penalties have been settled, the amount will be added back to the registrant's tax account. It will be an automatic penalty reversal and registrants do not need to contact the FTA for penalty reversal.

Amount Credited -Timeline

As per the Clarification, the reversed administrative penalty amount will be credited back to the registrant’s tax account within 90 days from the decision to approve the refund of the administrative penalties.

Certain examples of instances covered by this Clarification

• Failing to inform the FTA within the prescribed timelines about :
  
  • a new branch opened and uploading the related trade licence.
  • the business moved to another address.
• Failure of VAT/Excise Tax registered person to update records within the prescribed timelines before attempting to register for Corporate Tax (CT).
• Registering for CT with the incorrect details and failing to correct the information within the prescribed timelines.
  

Key Takeaways

In view of the above, it is crucial for all the registrants to review their tax records and identify any information that needs updating and take advantage of the grace period up to 31 March 2025, to make necessary updates without incurring penalties. 

Also, in case registrants have proceeded in rush with the CT registration without updating the records then they may make use of this grace period, hence amend details without incurring any penalty. Also, in cases where penalty was already levied, one may keep a track of reversal of such penalty.

Further, going forward, all the registrants must ensure to update any changes within the 20 business days timeframe and adhere to the prescribed timelines to avoid penal consequences post the grace period. 

Contacts

We have a dedicated Business Tax team based in the UAE who have in-depth experience and can support you throughout your readiness journey. Please get in touch with one of our tax experts listed on the following page.

You can also contact us and submit all your queries on this email cituae@deloitte.com.