Tax Litigation Support
Regional legislation (eg, the 2016 Common VAT Agreement of the States of the Gulf Cooperation Council) and international treaties, including double tax treaties that the United Arab Emirates is signatory to, may bind taxpayers and the UAE Federal Tax Authority.
Federal Decree-Law 13/2016 on the Establishment of the Federal Tax Authority was issued on 26 September 2016 and came into effect 90 days thereafter. The Federal Tax Authority has been operational since.
The Federal Tax Authority is entrusted with the management and collection of taxes and penalties, and the implementation of the federal tax legislation and tax penalties. The Federal Tax Authority is a federal public authority and has financial and administrative independence.
Pursuant to article 62 of Federal Law 23/1991 on the Regulation of the Legal Profession, the Federal Tax Authority is represented by the Department of State Disputes at the Ministry of Justice with respect to arbitration disputes and disputes before all instances of the UAE courts.
The Federal Tax Authority is made up of a board of directors chaired by the minister of finance. The director general of the Federal Tax Authority is responsible for executive decisions. The UAE tax regime is dominantly a self-assessment system that requires taxpayers to self-assess their tax liabilities and submit them to the Federal Tax Authority. Taxpayers are responsible for preparing their tax returns for each tax period. Submissions are done via the taxpayers’ online portal. There are no timeframes for review of a tax return.
In case of an incorrect tax return, the Federal Tax Authority issues a tax assessment to the taxpayer and may also apply administrative penalties.
Tax returns are, generally, automatically processed through the online user account system of the Federal Tax Authority. Every taxable person shall prepare the tax return for each tax period for which the registration has been made, submit the tax return to the Authority, and settle any payable tax as determined in the tax return. Any incomplete tax return submitted to the Authority shall be treated as rejected by it in case it does not include the main data required. Every taxable person is responsible for the accuracy of the information and data included in the tax return related thereto and in any correspondences with the Authority.
Record keeping is required for a period of five years after the end of the tax period for taxable persons, and five years after the end of the calendar year which the concerned document was created for non-taxable persons. The Authority may require the person to maintain the records for a further period not exceeding four years.
As applicable, taxpayers are required to maintain balance sheets and profit-and-loss accounts, records of wages and salaries, records of fixed assets, and inventory records and statements. However, the Federal Tax Authority has authority to require any other information to confirm an audit trail. Generally, taxpayers must maintain the documents for a period of five years after the end of the respective tax period. Original documents must be maintained and can be in a language other than Arabic or English, but in such a case the Federal Tax Authority may request documents to be translated into Arabic.
The Federal Tax Authority generally reaches out to employees via the registered contact details (email, phone) to request any clarifications. Apart from audits by the Federal Tax Authority, there are no explicit tax-related rules governing the general communication by the Federal Tax Authority with the taxpayer.
The Federal Tax Authority may issue a tax assessment to determine the value of the payable tax and notify the taxpayer with the assessment if, among other things, the taxpayer fails to apply for registration, fails to submit a tax return or submits an incorrect tax return, or fails to settle the amount defined in a previous tax return. The Federal Tax Authority may also issue estimated tax assessments if it is deemed impossible to determine the amount of tax payable.
Once an assessment takes place and is notified to a taxpayer, it is deemed a debt to the Federal Tax Authority, and ultimate to the Federal Public Treasury.
The Federal Tax Authority may conduct an audit at the premises of the taxpayer and inspect all documents, assets and accounting systems available. The taxpayer premises may be the headquarters, stores, warehouses or any other place deemed to be where the taxpayer conducts its business. During the audit, the Federal Tax Authority may also take samples of goods, equipment or other assets.
The Federal Tax Authority must generally notify the taxpayer five days prior to conducting a tax audit; however, the authority may conduct the audit without notification in certain cases, such as suspicion of tax evasion. MIA has developed a technology driven methodology to perform timely reconciliations of data extracted for tax reporting vis a vis data involved in financial reporting. This will avoid submission of misleading information to the tax authorities thereby avoiding unnecessary litigations.
Distinct committees were set up to act as the first level of review of government tax-related disputes. Cabinet Decision 23/2018 on Forming the Tax Disputes Settlement Committees, their Work Systems and Procedures was promulgated on 1 May 2018. The tax dispute resolution committees are administered by the Ministry of Justice but located in their respective emirate (Abu Dhabi, Dubai or Sharjah).
There are tax dispute resolution committees in the United Arab Emirates in three of the seven emirates:
Tax disputes circuits were established in 2019 in the Federal Primary Court and the Federal Court of Appeals to hear challenges against a ruling by any of the tax dispute resolution committees at the federal court level. The Federal Supreme Court is the last level of appeal where a litigant chooses to appeal a judgment by the Tax Disputes Circuit of the Federal Appeals Court.
The execution judge of the Federal Courts is responsible for executing enforcement decisions by the director-general of the Federal Tax Authority, rulings by a tax dispute resolution committee or judgments by the federal courts.
The Federal Public Prosecution is responsible for the administration of tax evasion crimes and the federal criminal courts are the competent courts to adjudicate tax evasion crimes.
The tax dispute resolution committees are administrative committees with the authority to issue judicial decisions. They are physically located in the courts of their respective emirate but are administered by the Ministry of Justice. Each committee is adjudicated over by a panel of three members: a judge who chairs the committee and two tax experts.
The Tax Disputes Circuits of the Federal Primary and Appeals Courts are constituted of a panel of three judges each.
The Federal Supreme Court, the last tier of appeal, is constituted of a panel of five judges, one of whom is the chief justice of the Federal Supreme Court, who chairs the panel.
However, at the Federal Primary Court and Federal Appeals Court, the taxpayer litigant may request the appointment of an expert from the expert rolls of the courts and may request the expert to opine on documents and evidence, hear witness statements, investigate private and government premises, among other powers, to prepare a report that is used by the Court to adjudicate the tax dispute.
In Saudi Arabia, the players involved in the disputes process are the taxpayers, the Authority (ZATCA) and what are effectively the specialized tax courts. These were previously managed under the General Secretariat of Tax Committees (GSTC), which now is called the General Secretariat of Zakat, Tax and Customs Committees (GSZTCC), after the merger of the Tax and Zakat committees with the Customs committees. For each type of tax, the GSZTCC has a specialized committee comprised of 3 members and a chairman. There is one of each specialized committee in Jeddah, Riyadh and Damam. Each specialized committee is further comprised of 2 levels, the preliminary level and the appellant level.
A taxpayer always has the right to dispute a matter upon disagreement with ZATCA. There is no set of legally defined generally applicable principles for the taxpayer and the tax authority in the Saudi legal framework.
MIA has a dedicated team to address the tax enquiries from the tax authorities and as well as provide comprehensive support in tax litigations. Please feel free to contact us should you have any queries.