Update on New Cabinet decision No 105 of 2021 (Penalty waiver and Penalty installments)

Recently a new Cabinet Decree No.105 of 2021 has been issued related to waiver and installment of administrative penalties.

This new cabinet decision will be effective on 1^st March 2022.

Please find below key highlights of this law:

Under this law, taxable person can apply for the installments for the payment or waver in full or part for the administrative penalties

Installment of administrative penalties:

Taxable person can apply for installments of penalty or fine if they fulfill below conditions:

Request can be made for unpaid penalty only;
The amount of penalties subject to installment should not be less than AED 50,000;
Taxable person can apply for installments of Penalties if these penalties are not currently disputed in front of the Tax Disputes Resolution Committee (TDRC) or Federal Courts;
Taxable person has to settle the tax due for tax period for which installment is requested

Penalties waiver:

As per the law taxable person can apply for waivers of penalty or fine if they fulfill below condition

Penalties are not to be associated with tax evasion cases.
Waiver request has to be made within timeline specified by the committee

Taxable person can make penalty waiver request for any of the following cases:

Death or illness of the taxpayer if the taxpayer is a natural person or owner of an establishment
Death, illness, or resignation of a key employee of the tax registered business.
Proof of restrictions or preventive measures, applied on the taxable by UAE government authorities.
Proof of system failure of the Federal Tax Authority (FTA), or payment and communication systems failure.
Causes relating to restrictions on freedom of a natural person taxpayer or owner of an establishment.
Taxes payment through the tax account of another registered taxable person.
In cases of insolvency, penalties may be waived if they have been paid prior to the insolvency or bankruptcy, and if it is proved that the insolvency was not for purposes of tax evasion.

Application of installment or waiver of penalty:

To apply for the waiver of penalty or Installment of penalty taxable person should follow below procedure

The request for either an installment or waiver request must include the following details in the request
1. Name of the person, Email and Address of the taxable person
2. Tax Identification number
3. Amount of the penalty
4. Date of the penalty imposed
5. Reason for penalty waiver / installment request

Taxable person has to make declaration:
1. For installment requests, the declaration should state that the penalties will be paid in accordance with the payment schedule that is accepted by the Committee.
2. For waiver requests, the declaration should state that the cause of the penalties shall be rectified, and that the cause will not be repeated again.
A taxable person should not file more than one request for the same penalty.
If Taxable person fails to comply with any of the above condition authority can reject the request

Timeline

The authority will study the request made by the taxable person for waiver and installments of penalty and within 40 working days FTA will submit the request to the committee if they fulfill all the requirements

Role of the committee

Committee will determine the time period for waiver request to be made
Committee will determine the installment system and payment plan, decide the payment dates
Committee may ask for further details from the Taxable person
Committee may decide how much fine they will waive
Decide the percentage of penalties to be waived in respect of waiver requests.
Request any guarantee it sees fit to process an installment request.
Committee will reply within 60 working days from the receipt application, if it does not reply that means it is rejected. Once committee made their decision it will be informed in 10 working days to taxable person

Failure to pay

If taxable person fails to pay the installments on timely manner, committee can cancel the installment plan, however taxable person can ask for the amendment in plan

Refund of penalty

Committee has the authority to decide the circumstances and rules in respect of paid penalties within the previous 5 years.
If paid penalties are waived retrospectively, the paid penalties subject of the waiver will be credited to the taxpayer’s account with the FTA within 90 business days or refunded in cash in case the taxpayer has canceled their tax registration.

This document is only for information purposes and should not be construed as an advice. It does not necessarily cover each aspect of the topic with which it deals. You should not act upon the contents of this document without receiving formal advice on your particular circumstances.

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