UAE, Federal Decree-Law No. 28 of 2022 on Tax Procedures, What Every Taxpayer Needs to Know

Federal Decree-Law No. 28 of 2022 on Tax Procedures replaced Federal Law No. 7 of 2017 and came into effect on 1 March 2023. It was amended by Federal Decree-Law No. 17 of 2024, effective 30 October 2024. The law does not impose any tax itself. Instead, it sets the common procedures and rules that apply to every federal tax administered by the Federal Tax Authority, including VAT, excise tax, and corporate tax, and it regulates the rights and obligations of both the Authority and the taxpayer.

On compliance, the law requires any person conducting a business or having an obligation under a tax law to keep accounting records and commercial books, with the detailed controls set by the Executive Regulation. The 2024 amendment added Article 4 (bis), which empowers the Minister of Finance to implement an Electronic Invoicing System and to determine which persons are subject to it. Tax returns and tax related documents must be submitted in Arabic, although the Authority may accept other languages if an Arabic translation is provided on request, at the taxpayer's cost and responsibility. A registrant must notify the Authority of any change to its registration data within 20 business days, and a legal representative must notify the Authority of their appointment within the same period.

Taxable persons are responsible for the accuracy of their returns and must settle payable tax on time. If a taxable person discovers an error that reduced the tax payable, or an incorrect refund claim that increased the refund, a Voluntary Disclosure is mandatory. Where an error increased the tax payable or reduced a refund, a disclosure is optional. Failing to disclose before being notified of a tax audit is itself a penalised violation. No Voluntary Disclosure may be submitted after five years from the end of the relevant tax period.

The Authority may audit any person, with at least 10 business days of notice. In defined cases, such as serious grounds to suspect tax evasion, the auditor may enter without notice and temporarily close the premises for up to 72 hours, with the written consent of the Director General and, for a residence, a permit from the Public Prosecution. A person under audit may ask to see the auditor's identification, obtain a copy of the audit notice, attend an audit held outside the Authority, and obtain copies of any documents taken. The Authority must issue a Tax Assessment and notify the taxpayer within 10 business days in cases such as late registration, a late or incorrect return, or non-payment, and may issue an estimated assessment where the correct figure cannot be determined.

Administrative penalties are assessed within five business days of the violation. They are set by Cabinet decision and may not exceed two times the tax in respect of which the assessment was issued. Penalties for a legal representative's failure to register their appointment or to file a return, and for failing to cooperate with an auditor, fall on the individual's own funds. Separately, the law creates criminal offences. Tax evasion, including deliberately failing to pay tax, understating the value of a business to stay below a threshold, or collecting tax without being registered, carries imprisonment and a fine of between one and three times the evaded tax. Giving false information, destroying records, or obstructing the Authority carries imprisonment and a fine of up to AED 1,000,000. Reconciliation is possible before or after a criminal case begins, in return for full settlement of tax and penalties plus the amounts set in the Executive Regulation.

The dispute process is strictly sequenced and its deadlines are short. A taxpayer may request a review of a tax assessment within 40 business days of notification, and may then request reconsideration within a further 40 business days. The Authority has 40 business days to decide each request. An objection to the Tax Disputes Resolution Committee must follow a reconsideration request and be filed within 40 business days of the Authority's decision, and it is not accepted unless the tax in dispute has been paid in full. The Committee decides within 20 business days, and its decision is final where the tax and penalties do not exceed AED 100,000. Larger disputes may be appealed to the competent court within 40 business days, provided the full tax has been paid and at least 50% of the administrative penalties has been settled in cash or by an approved bank guarantee.

Time limits cut both ways. The Authority generally cannot audit or assess after five years from the end of the tax period, but this extends to 15 years in cases of tax evasion or failure to register, and the period can be extended where an audit was notified within the five years or a Voluntary Disclosure was filed in the fifth year. Once a tax or penalty has been notified, the Authority's right to claim it never lapses. On collection, the Director General's decision is an executory instrument, assets can be seized where tax is at risk, and tax owed to the Authority ranks ahead of all other debts except judicial expenses. Where no deadline is set for an obligation, the Authority must grant between 5 and 40 business days. The burden of proving the accuracy of a return rests on the taxable person, while the burden of proving tax evasion rests on the Authority.