Last week UAE FTA issued a new Tax Procedures Regulation which repealed Cabinet Decision No. 36 of 2017 on the Executive Regulation of Federal Law No. 7 of 2017 on Tax Procedures that was issued back in 2017. The new regulation comes into force on the 1st of August 2023 and contains some very important updates that every business owner should be compliant with.
Below is the summary of the main changes so that you can get familiar with the new regulation without the need to read the whole regulation.
Definitions (Article 1)
The definition of the term “assets” has been expanded to include intangible assets. This means that the definition includes, for example, patents, brands, licenses, trademarks, computer programs, copyrights, goodwill and also customer lists. The definition of assets has a particular importance for the application of Article 18 of the New Executive Regulation.
Accounting record keeping (Articles 2 and 3)
In addition to the records and books of the business, businesses must also retain all documents that support entries in the accounting records and commercial books of the business (this is where it becomes quite handy to have a qualified accountant doing your bookkeeping as only an accountant or a bookkeeper will understand what supporting documents and calculations are required for each entry in your books!).
This includes, but is not limited to:
- Relevant correspondence, invoices and tax invoices, licenses and agreements/contracts related to the business.
- Documents containing details of any determination or calculation made by a taxable person in relation to its tax affairs, including the basis, method of estimation, determination made and calculation performed.
- Documents with respect to related party transactions and with respect to the circumstances under which such transactions were made, including, for example, transfer pricing documents.
The New Executive Regulation specifies that, for real estate records, the retention period is seven years from the end of the calendar year in which such record or document was created. For example, if a property was sold on 2 January 2025, the end of the calendar year in which the record is created would be 31 December 2025. Consequently, the related records and accounts must be retained until 31 December 2032.
The general document retention period of five years will be extended by one year starting from the date of submission of a voluntary disclosure in the fifth year from the end of the relevant tax period.
Legal representatives, as defined under Article 1 of the Decree-Law, are required to retain the required books and records of the person they are representing for a period of one year from the date on which such legal representation ends.
Language (Article 5)
Under the Previous Executive Regulation, the tax return, data, information, records and any other documents related to tax, had to be submitted, by default, to the FTA in Arabic.
All non Arabic speakers are now overwhelmed with joy as under the New Executive Regulation, the FTA may now accept the tax return, data, information, records and any other documents related to tax to be submitted in English or Arabic. If the documents were submitted in English, the FTA may, at its discretion, request to translate some or all documents into Arabic within a period that the FTA will specify in its request.
Procedures relating to Tax Registration, Deregistration, and Amending Details of Registration (Article 6)
Under the New Executive Regulation, the list of instances is expanded in which registrants are required to notify the FTA of changes to their business data to include notification of the following changes:
- E-mail address.
- Trade licence activities.
- Legal status and partnership agreement for unincorporated partnerships.
The FTA may, according to the New Executive Regulation, at its discretion but in accordance with the relevant Tax law, deregister a registrant where the person is required to deregister for a specific tax type but fails to submit a deregistration application.
UAE Licensing bodies (Article 7)
Under the Previous Executive Regulation, with respect to trade licences, and now under Article 7 of the New Executive Regulation, licensing bodies in the UAE must now also notify the FTA, within 20 business days of any issuance or renewal, of a number of data regarding the license.
Voluntary disclosure (Article 10)
If a taxpayer becomes aware of an error or omission in a tax return submitted to the FTA that did not impact on the due tax for that tax period, the person is required to submit a voluntary disclosure to rectify the error.
Errors with no impact on due tax include:
- Failing to report imported services, where the business is entitled to full input tax recovery in respect of the supply.
- Reporting supplies in Box 1 of the VAT return against an Emirate other than the Emirate in which supplies should have been recorded.
Means of notification (Article 11)
The means of notification by the FTA towards a person now also includes text messages on mobile phones, notifications through smart applications, and notifications through the FTA’s electronic systems. (Make sure to download FTA app that is available both for iOS and Android devices!)
Tax audits (Article 16)
Under the New Executive Regulation, the FTA is now required to give a person at least 10 business- day notice before conducting a tax audit. Overall, the procedures of the tax audit and the rights and obligations remain the same as already in effect.
The New Executive Regulations also includes some changes to tax agents registration, listing, de-listing; tax evasion crimes, bankruptcy – full text can be downloaded here.
Photo by Gabrielle Henderson on Unsplash