In the UAE, the Federal Tax Authority (FTA) has the authority to impose fines and penalties on businesses that fail to comply with the Value Added Tax (VAT) law. Such penalties can be quite high depending on the nature of the violation. However, where a taxpayer has a reasonable excuse for non-compliance, they can request for VAT Penalty Waiver and Refund of Administrative Penalties, in whole or in part.
What is a VAT Penalty Waiver in the UAE?
A VAT penalty waiver is a formal process of applying to the Federal Tax Authority (FTA) for the settlement of administrative penalties in installments or full waiver of all the penalties. The FTA considers each application on its merits and only waives penalties in cases where reasonable and acceptable causes are presented.
The Cabinet Decision No. 105 of 2021 shall apply to the requests for Waiver and Refund of Administrative Penalties, which are imposed on any Person for violating the provisions of the Tax Procedures Law or Tax Law.
Who Can Apply for a VAT Penalty Waiver?
Generally, applications for VAT Penalty waiver should be made to the FTA. However, the following parties are also permitted to apply for waiver on behalf of the taxpayer:
- Authorised tax advisors or registered tax agents in the UAE.
- A legal representative of the taxpayer where such representative has been authorised by the taxpayer.
- The Representative Member of the Tax Group (where the applicant is part of a Tax Group).
An important point to note is that tax consultants or advisors who are not registered tax agents are not permitted to apply for waivers on behalf of other entities.
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Conditions Required for Waiver of Administrative Penalties
The request for Waiver of Administrative Penalties can be approved if the following conditions are met:
- The violation for which the Administrative Penalties arose should not be in connection to a tax evasion crime.
- The submission of the request shall be within the period specified by the Committee.
- The Person’s request shall relate to one of the following cases:
- Death of Taxpayer or Sole Establishment Owner: if the death was a direct cause for failing to fulfil the tax obligation.
- Illness Preventing Compliance: if the illness prevented the person from fulfilling the tax obligation on time.
- Key Employee’s Death, Illness, or Resignation: Death, illness, or resignation of a key employee of a registered establishment. However, it is proven that this was a direct cause for not fulfilling the tax obligation on time.
- Government-Imposed Restrictions: if these restrictions or procedures were a direct cause for not fulfilling the tax obligation.
- System Malfunctions or Payment Gateway Issues: A general malfunction in the Authority’s systems, payment gateways or used telecommunication services, where that was a direct cause for not fulfilling the tax obligations of a Category of Persons on time.
- Custodial Sentence on Taxpayer: Execution of a custodial sentence on the registered person or the owner of a sole establishment.
- Tax Payments from Another Registered Account: The person carries out the tax obligations and settles all due tax amounts in accordance with the Tax Law through an account of another person registered for tax purposes with the Authority.
- Insolvency or Bankruptcy with Prior Compliance: Unless the insolvency or bankruptcy was intended to avoid paying penalties, a person who is insolvent or bankrupt and has paid all due taxes may qualify if the person has settled all due taxes prior to this.
How to Submit a Request for a VAT Penalty Waiver
Requests for Waiver of Administrative Penalties shall be submitted to the Authority in the forms prepared by the Authority for this purpose.
The request shall contain the following documents and information:
- Personal Information: Name and information related to the Person, including email and correspondence address.
- Tax Registration Number (TRN): If you have one, include your TRN in the document.
- Details of the Administrative Penalties: Amount of Administrative Penalties and violations relating to the Request.
- Date of Penalty Imposition: Mention the date of imposition of the Administrative Penalties subject of the Request.
- Reason for Request Submission: Make sure that you clearly state whether you want a waiver or an installment plan and explain why you need it. Explain why you have not complied with the relevant laws.
- Undertaking for Penalty Waivers: If you are applying for a penalty waiver, then you should attach an undertaking that the person has corrected the violation and undertakes not to repeat the violation.
- Additional Documents: Any other documents or details requested by the Committee or the Authority.
Restrictions on Multiple Requests
The Person shall not make more than one request for Waiver of Administrative Penalties in respect to the same Administrative Penalties under review.
Compliance with Submission Requirements
It is crucial to follow all the conditions laid down for the submission of the request. The Request shall be disregarded if all the requirements and conditions mentioned in the law are not met.
Read Also: Check the Validity of a Tax Registration Number in UAE
Timeline for VAT Penalty Waiver in UAE
The FTA follows a structured process to review waiver applications:
- Review Phase: The FTA shall present to the Committee the requests that are received within a period not exceeding 40 business days from the date of receipt of the request.
- Decision Phase: The Committee shall decide on the requests submitted to it within 60 business days from the submission of the matter to the Committee.
- Notification Phase: Within 10 working days of the decision, the taxable person is notified.
- Implicit Rejection: The Committee shall decide on the requests submitted to it within 60 business days from the submission of the matter to the Committee, otherwise, non-response shall be deemed a rejection of the request, and the decision of the Committee shall be deemed final.
Consult VAT Consultants Services in the UAE
VAT Registration UAE provides professional services to assist companies in the right way of applying VAT Penalty waiver application and increasing the chances of getting approval.
Our tax consultants can help with:
- Determining whether you are eligible for a VAT penalty exemption.
- Completing and submitting the necessary forms.
- To make sure that all the legal provisions regarding VAT are met so as to prevent penalties in the future.
If you require assistance in applying for a VAT penalty waiver in the UAE, then feel free to contact VAT Registration UAE for professional tax advice.
FAQs: FTA Penalty Waiver and Installment Plan in the UAE
Q1. How to apply for a VAT penalty waiver request online?
- Login to the e-services portal.
- Upon entering the Dashboard, a tab will appear for several requests, one for “Reconsideration” and the other one for “Penalty waiver” and for “Penalty Installment Plan.”
- Click on the required request and fill in the data of the request to be submitted, and make sure to add the related supporting documents.
- Fill out the form, attach the required documents and submit the form.
Q2. What is a VAT Penalty Waiver, and who is eligible to apply?
A VAT Penalty Waiver is the cancellation of administrative penalties which are charged for non fulfilment of tax obligations. You can apply if:
- The violation is not a tax evasion.
- The application is submitted within the time limit set by the Committee.
- The case must meet the further criteria, such as illness, death, government restrictions, or other reasons that must be justified by the Committee.
Q3. What types of cases qualify for a VAT Penalty Waiver?
The Committee may waive penalties in cases such as:
- Death or illness of the taxpayer or sole proprietor.
- Death, illness, or resignation of a key employee that results in non-compliance.
- Government restrictions or system failures that lead directly to non-compliance.
- Insolvency or bankruptcy, only where there was no intent to evade penalties.
- Any other reasonable cause as allowed by the Committee.
Q4. What documents do I need to submit when applying for a VAT Penalty Waiver?
- Your Name and information, including email and correspondence address.
- The penalties and explanations of the request.
- An undertaking by the Person that the person has corrected the violation and undertakes not to repeat the violation.
- Any other information or documents as may be required by the Authority or Committee.
Q5. How long does it take to get a decision on a VAT Penalty Waiver?
The Committee will examine and render a decision on your application within sixty (60) working days from the date of application. If no response is received by the committee, the request is considered to be rejected.
Q6. Can I apply for a waiver for the same penalty more than once?
It is not allowed to submit more than one waiver application for the same administrative penalty.
Read Also: Everything You Need to Know About VAT Registration in UAE
