A Guide to Tax according to the Federal Law No.7 of 2017 on Tax Procedures
25

Mar 2020

On the 24th September 2017, the cabinet of the United Arab Emirates issued Decision number 36 on the Executive Regulation of Federal law number 7 of 2017. This decision deals with the tax procedures and the importance of various other provisions which include keeping accounting records and commercial books relating to tax purposes as well as the period of the record-keeping mechanism and saving.

This decision of the cabinet deals mostly with the taxes and their assessment, penalties, tax refund, bankruptcy cases and reduction or exemption from said penalties in the future. This decision was published in the Official Gazette and came into effect from the date of its issuance.

Some of the significant parts of the Cabinet Decision number 36 of 2017 on the Executive Regulation of Federal law number 7 of 2017 on Tax Procedure are given below:

●The Books of the Business and the Accounting Records

The Executive Regulations dictate the necessary and compulsory inclusions in the Commercial Books and the Accounting Records. These include keeping records of payments and receipts, all the purchases and sales of the business, any revenue or expenditure of the company and any other matter which is required under any tax law or any other law applicable.

The Federal Tax Authority (FTA) will review all the books of the business and all the accounting records of the business. The FTA also possess the right to ask for any more information to correctly gauge the tax liability of an entity. Any person who keeps and takes care of the accounting books or all the accounting records, they need to keep the files in such a manner that it is easy for the Commission or any authorized person to ascertain the tax obligations that have been imposed for a period of five years.

●Tax Registration Procedures and their Cancellation

Many procedures need to be followed while registering for tax or the cancellation of tax. This includes the filing of a tax registration application by any entitled person. The Authority will study the application, and if the application is in order, it has the power to cancel the application. The specified Authority will need to inform the entity about the status of the tax registration. The tax registration can either be cancelled or reactivated.

●Liabilities for Taxes

The Authority has the power to allocate the amount of money paid as taxes by an entity according to the seniority or to settle any debts or liabilities if the taxable entity pays an amount to the Authority without clarifying the tax period or the type of tax to be paid.  In case the amount paid is more considerable than the total dues of the entity, the balance amount can be held as credit which will be used in future taxable obligations.

●Voluntary Declaration of Commission

In line with the decision taken, if there is a mistake in the tax assessment by the concerned Authority or if there is a mistake in the tax return filed by the taxpayer, the error must be corrected within the tax period in which the error has been discovered.

●The Rights and Obligations of Tax Agents

There are many conditions which need to be fulfilled by an entity to be registered in the registry. Some of these conditions include:

  • Good Conduct
  • Obtain a Bachelor’s degree 
  • The person should never be convicted of a felony or misdemeanour
  • A Master’s degree from of law, accounting or tax from a recognized institution
  • Have practical experience of at least three years in the field of tax or legal accounting
  •  Ability to communicate orally and in writing in both Arabic and English

●Tax Auditing

The Authority will make a decision on a person's tax audit, but before that, it will decide that it is a tax audit necessary. If the tax audit is necessary, the Authority will determine the responsibility associated with him to comply with the tax law and will also determine the tax revenues, administrative burdens and compliance burdens for the entity.

The Commission can also perform a re-audit which will take into account the results of the previous tax audit and the availability of any new information. In addition to the review of the related documents, the Authority may also inspect the premises and the headquarters of the tax assessor. After an Audit, the subject should be notified within ten working days.

●Tax Assessment and the Fines

If the amount of tax or fine is stated to a person, it is now considered as a debt which is owed to the Authority.

The above mentioned are only some of the excerpts which the Federal Law No. 7 of 2017 on Tax Procedures talks about. For an in-depth knowledge of the Executive Regulation of the Federal Law, read the Executive law published by the UAE Government.

Understanding the newly formed laws about taxation is very important as it can affect both the profitability of the business as well as the situation of the economy. That taxation policy of a country will also affect the number of businesses coming in to set up a business in that country.

If you require tax services or audit and accounting services, you should look into the services provided by Jaxa Chartered Accountants. Jaxa will not only take care of the financial situation of the business but will also advise you from time to time as to what steps need to be made. For more details on the services provided, contact us. We will be glad to help you.