Key highlights from the recently published UAE Tax procedures law for small and medium sized businesses
The UAE Tax procedures law was released in late July which is the legal document covering the tax procedures in the UAE. Although this is not the detailed VAT Law, nevertheless, it covers many aspects which small and medium sized businesses would need to be aware of when preparing for VAT.
Note: The following articles below are extracts from the unofficial English translated version of the UAE Procedures Law. The full version can be obtained from the UAE Ministry of Finance website.
Article 4 – Record Keeping
Any Person conducting any Business must keep Accounting Records and Commercial Books of his Business and any Tax related information as determined by Tax Law and maintain the same according to the controls that will be specified by the Executive Regulations of this Law.
Article 5 – Language
Each Person must submit the Tax Return, data, information, records and documents related to Tax that he is required to submit to the Authority in Arabic as determined by the provisions of the Tax Law.
The Authority may accept data, information, records, and documents related to Tax in any other language, provided that the Person provides the Authority with a translated copy of any of them into Arabic at his expense and responsibility if so requested, and in accordance with the Executive Regulations to this Law.
Article 7 – The Legal Representative
Any Person appointed as a Legal Representative of a Taxable Person or his funds or his inheritance must inform the Authority within 20 business days from the date of the appointment, and according to the procedures that will be specified in the Executive Regulations of this Law.
Article 13 – Tax Agents Registration
It is not permitted for any Person to practise the profession of a Tax Agent in the State unless he is listed in the Register and licensed for this purpose by the Ministry of Economy and the competent local authority.
Article 17 – The right of the Authority to perform a Tax Audit
- The Authority may perform a Tax Audit on any Person to ascertain the extent of that Person’s compliance with the provisions of this Law and the Tax Law.
- The Authority may perform the Tax Audit at its office or the place of business of the Person subject to the Tax Audit or any other place where such Person carries on Business, stores goods or keeps records.
- If the Authority decides to perform a Tax Audit at the place of Business of the Person subject to the Tax Audit or any other place where such Person carries on his Business, stores goods or keeps records, the Authority must inform him at least five business days prior to the Tax Audit.
- By way of exception to section (3) of this Article, the Tax Auditor has the right of entry to any place where the Person subject to the Tax Audit carries on his Business, stores goods, or keeps records, and as the case may be it will be temporarily closed in order to perform the Tax Audit for within a time limit not exceeding 72 hours without prior notice in any of the following cases:
- if the Authority has serious grounds to believe that the Person subject to the Tax Audit is participating or involved in Tax Evasion whether related to this Person or another Person;
- if the Authority has serious grounds to believe that not temporarily closing the place where the Tax Audit is conducted will hinder the conduct of the Tax Audit;
- if the Person who has been given advance notice of the Tax Audit under section (3) of this Article attempts to hinder the Tax Auditor’s access to the place where the Tax Audit is to be performed.
- In all cases stated in section (4) of this Article, the Tax Auditor must obtain the prior written consent of the Director General; and if the place to be accessed is a place of residence then a permit from the Public Prosecutor must also be obtained.
- Places closed under this Article must be reopened upon the expiration of 72 hours, unless the Authority obtains a permit from the Public Prosecutor to extend the closure time limit for a similar period prior to the expiry of the preceding 72 hours.
- A criminal case can be initiated only upon an application from the Director General.
- The Executive Regulations of this Law shall specify the necessary procedures related to the Tax Audit.
Article 18 – The Right of the Authority to Access the Original Records or Copies Thereof During a Tax Audit
While conducting a Tax Audit, the Tax Auditor may obtain original records or copies thereof, or take samples of the stock, equipment or other assets from the place at which the Person subject to the Tax Audit carries on his business or which are in his possession, or may seize them in accordance with the rules that shall be specified in the Executive Regulations of this Law.
Article 19 – Timing of the Tax Audit
A Tax Audit will be conducted during the official working hours of the Authority. In cases of necessity, a Tax Audit may be exceptionally conducted outside such hours by decision of the Director General.
Article 26 – Tax Evasion Penalties
- Without prejudice to any more severe penalty applicable under any other law, a prison sentence and monetary penalty not exceeding five times the amount of evaded Tax or either of the two, shall be imposed on:
- a Taxable Person who deliberately fails to settle any Payable Tax or Administrative Penalties.
- a Taxable Person who deliberately understates the actual value of his Business or fails to consolidate his related Businesses with the intent of remaining below the required registration threshold.
- a Person who charges and collects amounts from his clients claiming them to be Tax without being registered.
- a Person who deliberately provides false information and data and incorrect documents to the Authority.
- a Person who deliberately conceals or destroys documents or other material that he is required to keep and provide to the Authority.
- a Person who deliberately steals, mis-uses or causes the destruction of documents or other materials that are in the possession of the Authority.
- a Person who prevents or hinders the Authority’s employees from performing their duties.
- a Person who deliberately decreases the Payable Tax through Tax Evasion or conspiring to evade Tax.
- The imposition of a penalty under the provisions of this Law or any other Law shall not exempt any Person from the liability to pay any Payable Tax or Administrative Penalties under the provisions of this Law or any Tax Law.
- The competent court shall impose Tax Evasion penalties against any Person who is proven to have been directly involved or instrumental in Tax Evasion pursuant to Federal Law No. (3) of 1987 referred to.
- Without prejudice to section (2) of this Article, any Person who is proven to have been directly involved or instrumental in Tax Evasion pursuant to section (3) of this Article shall be jointly and severally liable with the Person whom he has assisted, to pay the Payable Tax and Administrative Penalties pursuant to this Law or any other Tax Law.
Article 33 – Challenge Procedures before Courts
- Without prejudice to the provisions of Article (32) of this Law, the Authority and a Person may challenge any of the Committee’s decisions before the Competent Court within 20 business days from the objector being notified of the Committee’s decision.
- Challenges may be made to the Competent Court in the following instances:
- There being an objection to the whole or part of the decision of the Committee.
- A decision not having been issued by the Committee regarding an objection submitted to it in accordance with the provisions of this Law.
Article 35 – Tax Refund Procedures
- The Authority shall set-off the amount applied to be refunded against any other Payable Tax or Administrative Penalties due from the Taxpayer who has applied for the refund pursuant to the Tax Return or Tax Assessment issued by the Authority before refunding any amount relating to a particular tax.
- The Authority may decline to refund the amounts mentioned in section (1) of this Article if it finds that there are other disputed Tax amounts that are due in relation to that Person or according to a decision of the Competent Court.
- The Authority shall issue a Tax refund under this Article pursuant to the procedures and provisions specified in the Executive Regulations of this Law.
Please note: this article has been prepared using extracts from the UAE Tax procedures law and therefore cannot be relied on to cover specific situations; application of the principles set out will depend upon the particular circumstances involved and we recommend that you obtain professional advice before acting or refraining from acting on any of the contents of this publication. Alpha Pro Partners would be pleased to advise you on how to apply the principles set out in this publication to their specific circumstances. Alpha Pro Partners accept no duty of care or liability for any loss occasioned to any person acting or refraining from action as a result of any material in this course.