19 Sep 2023
The United Arab Emirates (UAE) Ministry of Finance (MoF) recently announced Cabinet Decision No. (74) of 2023 introducing significant changes to the Executive Regulation of Federal Decree-Law No. (28) of 2022 on Tax Procedures, also known as the New Tax Procedures Law. The Cabinet Decision aims to align definitions, procedures, and processes with the recently introduced Corporate Tax Law, which became effective on 1st June 2023. This blog will delve into the critical updates by Cabinet Decision No. (74) and explore its implications for taxable persons in the UAE.
Background and Purpose of Cabinet Decision No. 74 of 2023
The UAE government has been actively enhancing its tax regulatory framework to meet international standards and ensure effective taxation. Cabinet Decision No. (74) is part of this ongoing effort, updating the existing Executive Regulation on Tax Procedures. By introducing these amendments, the government aims to provide clarity to taxpayers and ensure ongoing compliance with the newly introduced Corporate Tax Law and other tax regulations.
Cabinet Decision No. (74) brings several noteworthy changes to the UAE's tax procedures. Some of the critical updates include:
1. Expanded Definition of Assets
The definition of "Assets" has been amended to include intangible assets like patents, trademarks, copyrights, and goodwill, among others. This expansion aims to cover a broader range of assets subject to taxation, promoting transparency in tax reporting.
2. Enhanced Recordkeeping Requirements
Taxable persons are now required to retain additional records, including correspondence, contracts, invoices, transfer pricing documentation, and documents supporting election/calculation made regarding the estimation method. This change seeks to ensure taxpayers maintain comprehensive and accurate records to facilitate tax compliance and audits.
3. Extended Period for Recordkeeping
The retention period for real estate records has been extended to 7 years from the end of the year the record was created. Additionally, the general document retention period of 5 years can be extended by one year from the date of voluntary disclosure submission in the 5th year from the end of the relevant tax period. Legal representatives must also retain records for one year from their representation's end.
4. Language Flexibility
The Federal Tax Authority (FTA) can now accept tax-related documents and information submitted in English or Arabic. This language flexibility aims to facilitate communication and compliance for businesses operating in the UAE.
5. Tax Agent System Update
The New Executive Regulation introduces changes to the tax agent system. Natural persons acting as tax agents must now meet specific requirements, including specialism, experience, education, and fluency in Arabic and English. Additionally, the concept of a juridical person tax agent has been introduced, setting out requirements for juridical persons to become tax agents.
Implications for Taxable Persons
The Cabinet Decision significantly impacts taxable persons in the UAE, especially those subject to the Corporate Tax Law. Businesses are advised to carefully review the changes and amendments introduced by the new regulation and assess their impact on their operations. Understanding the new requirements for recordkeeping, tax agent obligations, and timelines for tax assessments and objections is crucial to ensure compliance and avoid penalties.
The effective date of the New Executive Regulation is 1 August 2023, except for the provisions relating to the conditions for registering juridical tax agents, which come into effect on 1 December 2023. As this date approaches, taxable persons must proactively familiarize themselves with the updated regulations and ensure their businesses are fully prepared to meet the new requirements.
Cabinet Decision No. (74) represents a significant step towards improving and enhancing the UAE's tax regulatory framework. By aligning the Executive Regulation with the New Tax Procedures Law and introducing crucial updates. As the practical date approaches, businesses must understand and implement the changes as applicable to ensure seamless compliance with the UAE tax system. Adhering to the revised recordkeeping requirements, familiarizing yourself with the tax agent system updates, and staying informed about the latest tax procedures will contribute to the success and growth of businesses in the UAE.