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New UAE Cabinet Decisions: Tax Procedures, Penalties, and Exemptions Explained

The UAE Cabinet has recently issued new decisions pertaining to tax procedures, penalties, and exemptions, aiming to streamline the corporate tax landscape. Under Cabinet Decision No. (75) of 2023, the Federal Tax Authority (FTA) will enforce administrative penalties from August 1, 2023, on taxable individuals and legal entities who fail to comply with the corporate tax law.

These penalties apply in cases of late filing and payment of corporate tax, as well as failure to inform the FTA of any changes in tax records that may necessitate amendments. To facilitate compliance, the UAE government has designed the penalties carefully, ensuring they do not unduly burden businesses adhering to the new regulations.

Key highlights of new UAE Cabinet Decision on penalties related to corporate taxes:

  • Requirements for maintaining accounting records and commercial books, along with the stipulated duration and methods of their upkeep

  • Updates related to the procedures for registering delisting, and suspending a tax agent, and the rights and responsibilities vested in a tax agent

  • Procedures related to reconciliation in tax evasion crimes including the specific terms and conditions that underpin the reconciliation process

  • Tax refund procedures, tax payment, and administrative fines in cases of bankruptcy

Updates on new tax changes in UAE

Cabinet Decision No. (74) of 2023 introduces significant changes to tax procedures related to VAT, Excise Tax, and Corporate Tax in the UAE, effective from August 1, 2023. These changes encompass various aspects, such as the expanded definition of 'Assets' to include 'Intangible Assets,' obligations to retain supporting documents for accounting entries and commercial books, and the reduction of the retention period for real estate transaction records from 15 years to seven years.

Moreover, taxable persons are now required to submit voluntary disclosures to rectify tax return errors, even if they do not impact the 'Due Tax' for that period. The proficiency in Arabic requirement for tax agents registered with the FTA has been removed, allowing tax professionals with proficiency in either English or Arabic to become tax agents. Additionally, juridical persons, i.e., legal entities, are now eligible to register as tax agents, broadening the scope of representation.

Tax audit changes in UAE

In terms of tax audits, the FTA must provide at least ten business days' notice to the taxable person before conducting the audit, offering a more reasonable timeline for preparation. Furthermore, Cabinet Decision No. (81) of 2023 outlines additional conditions for qualifying investment funds under the Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses. To be exempt from corporate tax, investment funds (excluding Real Estate Investment Trusts or REITs) must primarily engage in investment business activities, with ancillary activities not exceeding 5% of their total annual revenue. The ownership interests held by a single investor and its related parties should not exceed 30% or 50%, depending on the number of investors in the fund.

Required investment manager in UAE

Moreover, the investment fund must be overseen by an investment manager with a minimum of three investment professionals, and the day-to-day management should not be controlled by investors.

Changes for Real estate investment trusts

For REITs, the exemption conditions include real estate assets (excluding land) exceeding Dh100 million in value, a minimum of 20% of share capital being publicly listed or wholly owned by two or more institutional investors, and an average annual real estate asset percentage of at least 70%.

These recent decisions reflect the UAE government's commitment to fostering a compliant and robust tax system, ensuring alignment with global standards while encouraging growth in the corporate sector.

Find reliable partner in UAE

As you navigate the complexities of the UAE's evolving tax landscape, Eastern Region Group stands ready to be your trusted partner. Our team of expert consultants possesses in-depth knowledge of the latest tax procedures, penalties, and exemptions, ensuring that you remain compliant and make informed decisions for your business.

We offer personalized guidance in understanding the new regulations and can assist you in mitigating any risks related to tax compliance. Whether you need support in filing tax returns, ensuring proper record-keeping, or exploring tax-efficient investment opportunities, Eastern Region Group is here to provide seamless assistance and empower you to thrive in the ever-changing business environment of the UAE.

Visit our website or reach out to our dedicated team for a personalized consultation at +971 56 901 5507.

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