A cursory glance at the present scenario of the UAE reveals that the VAT regime has started to settle in the UAE as the individuals and businesses alike have understood the fundamentals of the newly introduced tax system.  However, it is imperative to have a clear understanding of VAT penalties to stay at a bay from unfortunate incidents. Along with this, the taxpayers should know the process of dispute handling in case of a disagreement with the Federal Tax Authority for penalties imposed for any reason.

Sometimes, unfortunate incidents happen. In a case that a taxpayer is not agreed with the decision of FTA, the first thing is to submit a request for reconsideration. After that, the disagreed party can submit an objection to the Tax Disputes Resolution Committee (TRDC). However, if the penalty is more than AED 100,000, the beholder can appeal to the Federal Court. But, it has a proper process that every individual should follow to deal with litigation.

Facing the same problem but don’t know the process of plea in the Federal Court of Appeal? Read the article until the end to get an in-depth understanding of the complete process.

Basic Reasons for VAT Penalties

1. Inability to fill VAT return in UAE

2. Wrong submission of tax return

3. Lack of record maintenance for UAE taxpaying

4. Ignoring penalties in the first place

5. Intentionally hiding or provision of wrong information

6. Inability to comply with tax evasion policy

It is always suggested to avoid potential mistakes or errors while complying with VAT regulations. For this purpose, the company should avoid experimentation when they can get the assistance ofthebest VAT consultancy to avoid fines and troubles in the first place. It is crucial because VAT obligations can get complicated without proper understanding.

Pre-Requisites for Filing a Tax Dispute

There is no denying that VAT is imposed on almost every business based on the provided criterion of zero, exempted, and payable categories.  So, the taxpayers should focus more on acquiring knowledge of the VAT registration and compliance process. It is not that you have seen the fine and rushed towards the courts for pleasure consider the below before taking any decision.

1. Complete understanding of tax regulations for handling penalty disputes

2. Submission of reconsideration application for penalty claims

3. Submission of appeal only in the case fine plus tax is more than AED 100,000 

Essential Guide on Plea for Vat Penalties in UAE

It is imperative to understand that value-added tax (VAT) is a tax based on the concept of self-assessment. It means that taxpayers have to affirm the due tax amount or the amount refundable for every period of tax based on all taxable tasks and activities after self-evaluation or VAT calculation. The FTA issues a decision after audit while the taxpayer has filled the VAT return. The decision may comprise the amount of tax along with the penalty for a particular tax period. It is essential that the taxpayer should pay the mentioned amount within the given time deadline.

However, if the taxpayer is not agreed with the decision of the FTA, the case can be forwarded to the court for settlement. For this purpose, the individual should follow the given process:

Phase 1: Application submission for reconsideration

The individuals who feel concerned about the FTA decision can submit an application for reconsideration to the authority.  The individual is required to take a clear stance over the matter, along with a clear justification. The duration for application submission is 20 business days.

After the submission of the application, the authority reviewed the request and informed the applicant about the reviewed decision within the five working days of decision issuance.

Phase 2: Objection submission to TDRC

The vat system of the UAE is very taxpayer-friendly. It is evident from the fact that if the individual is not agreed with the reviewed decision, he/she still has the right to go for objection. In the way, the Tax Dispute Resolution Committee (TDRC) will get into the issue handling.  The taxpayer may file a petition with TDRC in order to request for considering the objection in the light of jurisdiction.

The TDRC has the right to decide on the issue to mitigate the objections in the best way possible. However, the issue can be extended depending on the severity of the matter. Taxpayers have 20 days after receiving the FTA decision to make an objection.

Phase 3:  Petition filing to the Federal Court of Appeal

It is noteworthy to understand that if the penalty is less than AED 100,000, the TDRC decision will be considered the final binding to all involved parties. In a case that the amount is equal or more than AED 100,000, the taxpayers can move to the Federal Court of Appeal. However, the petition should be filed within the 20 business days after the decision notice from the TDRC.

Essential relief that the taxpayer may get!

If you are thinking about the outcomes of getting into dispute or disagreement with the FTA imposed penalties. You should know that FTA can provide relief to the taxpayers, as mentioned below:

1. FTA has the right to reduce or waive off the penalties in a case of receiving justifiable claims from the taxpayers that penalties are imposed unfairly

2. The taxpayers can get relief by providing evidence to support their stance for the unjust imposition of penalties.

3. The Authority is required to notify the reduction or elimination of penalties within the specified time.

4. The disputing person can correct the violation before appealing for a companion, and the FTA can take decisions accordingly.

Exception Handling in VAT penalties

Generally, the penalties are imposed owing to incorrect tax evaluation or inability to comply with tax obligations. In such a situation, TDRC may not play any part in handling the dispute. So, the issues are usually taken to the civil courts of the relevant emirate. The cases are usually handled by court-appointed experts and VAT consultants. The litigation lawyers are usually hired to support the cases in the court.

Feel helpless? Consult with VAT experts!

Summing up, complying with VAT obligations can be a hard nut to crack without proper knowledge and expertise. Since the start of the year, taxpayers from different industries have faced the issues pertaining to VAT assessments, filling, and return that resulted in severe penalties. If you are the one of such taxpayer, you should surely go for compensation plea.

However, a lack of proper understanding of the process and provision of evidence can deteriorate the situation more. So, it is better to get assistance from experienced experts for VAT in the UAE. Let us help you!

Contact Us today to appeal for VAT penalties with a comprehensive preparation and in-depth understanding. We offer top-notch VAT consultancy and litigation services to help you to come clean in the process of tax compliance!