Introduction

As the overhauling of the UAE tax regime comes to a conclusion, the United Arab of Emirates (“UAE”) Cabinet (the “Cabinet”) issued its decision no. 74 of 2023 on the Executive Regulation of Federal Decree-Law No. (28) of 2022 (“Tax Procedures Law” or “TPL”) on Tax Procedures (the “Executive Regulations” or “ERs”), which was issued by the Cabinet on 10 Jul 2023 and coming to effect on 1 August 2023. The TPL, in effect as of 1 March 20233, was set to change the current shape of the tax procedures landscape in the UAE, in line with the already shifting UAE Tax landscape[1] by introducing various new concepts in terms of liability, amending the current threshold, widening the FTAs authority in tax audits and other amendments and introductions. The Executive Regulations, though not introducing new concepts, have finally elaborated on the ambiguities of the TPL. This article will stand on key takeaways from the Executive regulations that are critical for businesses during this overhauling of the UAE Tax Regime.

Statutory recordkeeping

1. The Executive regulations address a statutory obligation of recordkeeping by any person who is subject to any applicable UAE tax laws. Such recordkeeping must include, as per Article 2 of the ERs, (i) documents evidencing or recording their which evidence or in which payments and receipts, purchases and sales, revenues, expenditures or any other matters that may be required to be required as per the applicable tax laws; (ii) documents supporting any entries found in accounting records and commercial books (correspondences, licenses, contracts, documents related to a taxpayer’s election or determination of certain status or affairs of their business … etc.); and (iii) any documents requested by the Federal Tax Authority (the ”FTA”) for the verification of a person’s tax obligations, including their responsibility to register for tax purposes.
2. Article 3 of the ERs set various recordkeeping periods considering elements such as the recordkeeper being a taxable person (5 years), being in the real estate business (7 years), being subject to a disputes with the FTA or tax auditing (4 years), conducting a voluntary disclosure in line with Article 10 of the TPL (1 year). A Legal Representative, as defined by Article 1 of the TPL, must also keep the aforementioned records for a period of 1 year after he cease to be a Legal Representative.
3. The ERs also stipulate certain formalities for methods of recordkeeping, including how they may be electronically kept. Such methods may also be elaborated upon the FTA.

Appointment of Legal Representatives

A Legal Representative (defined as “The guardian or custodian of an incapacitated person or minor, or the bankruptcy trustee appointed by the court for a company that is in bankruptcy, or any other person legally appointed to represent another person.” as per Article 1 of the TPL, must notify the FTA of so with sufficient documents that support his appointment, including any additional documents that may be requested by the FTA. The FTA, should it accept a Legal Representative’s appointment, shall notify them of such an acceptance within twenty (20) days of its acceptance.

 Allocation of payments and credit with the FTA

The Executive Regulations allow for allocation of any unspecified payments by a taxable person to the FTA to be allocated for the settlement of any liabilities due to the FTA based on their due date seniority, and the excess of which shall be deemed a credit for that taxable person for future settlement of their liabilities due to the FTA. However, such a credit, if not requested to be refunded by the person, it may be used for settlement for any liabilities due to the FTA, based on their due date seniority. In all cases, the FTA shall notify the person in question of such procedures.

 Submission of Voluntary Disclosures

The TPL allows for a person subject to any UAE tax laws to submit for a voluntary disclosure of any miscalculations or error in tax assessment or returns submitted to the FTA. Depending on the margin of error, as measured in AED, and the timing of discovering the error or miscalculation, the taxable person shall amend such an error in the tax return due for a concluded tax period, or the tax period not yet concluded, whichever is earlier.

Means of which the FTA may contact taxpayers

The FTA can now contact and notify persons, legal representatives, or tax agents through various electronic means which include email, mobile text message, smart applications or the electronic system of the FTA. The FTA may also agree with any person in writing to use any other means of contact.

Revamped Tax Agents Regime

Tax Agents (defined as any person registered with the FTA who is appointed on behalf of another person to represent him before the FTA and assist them in the fulfilment of their tax obligations and the exercise of their associated tax rights as per Article 1 of the TPL) now have a complete regime on their registration requirements with the FTA, registration process, and their rights and obligations, registration of Tax Agents shall come into effect on 1 December 2023.

The FTA’s authority to conduct Tax Audits

The Executive Regulations now elaborate on the notification of, the conduct, results of, and the FTA’s authority to conduct a tax audit on a person subject to a UAE tax law. The ERs now affirm that the FTA may inspect electronic documents for the purposes of tax audits. Additionally, a tax auditor may now cease any documents or assets (which now include intangible assets) for the purpose of concluding tax audits. The tax audits and its associated seizures are subject to various records and measures that are detailed in the ERs.

What should business of the UAE do?

With the introduction of sufficient explanation of the TPL through the ERs, it is now clear that businesses in the UAE are bound to actively comply with the TPL especially that it would be an executive arm to other key UAE tax laws that are not in effect, such as the Corporate Tax Law. Additionally, it may become imperative to seek all sorts of support in order to spot where a business’ internal auditing system may have vulnerabilities that may lead to non-compliance with applicable tax laws. It is now safe to say that the UAE tax landscape will not be the same with the introduction of a modern and sophisticated taxation system that may strike an equilibrium of resources and benefits between the UAE government and taxpayers.

How GLA can help?

At GLA & Co, we specialize in providing legal tax services to meet the unique needs of businesses. Our team of experienced tax attorneys and consultants is dedicated to helping your company navigate the complex landscape of corporate taxation.

[1] You can read our series on the new UAE Tax Regime here: Part1 – Part 2 – Part 3 (the latest article which we did not publish yet)

Authors: Yousef Al Amly, Partner and Khaled Al Khashab, Associate.

For further information, please contact Alex Saleh (alex.saleh@glaco.com) and Yousef Al Amly (y.alamly@glaco.com).