8 November 2024
 
Public Clarification on updating information in tax records with FTA
Introduction

The Federal Tax Authority (FTA) has released a Public Clarification No. TAXP007 on Tax Procedures, which provides grace period for registrants1 to amend information related to their tax records available with the FTA without the imposition of administrative penalty.


Background
  • As per the Federal Decree-Law No. 28 of 2022 on 'Tax Procedures' along with Cabinet Decision2 thereto, registrants are required are required to inform FTA within 20 business days of the occurrence of any event that might require the amendment of information related to their tax records kept by the FTA.
  • In case the required amendment is not made within the 20 business days, then the FTA considers this as a tax violation and certain penalties have also been prescribed in the existing regulations and cabinet decisions.3
  • In order to encourage registrants to update their records, FTA has now issued this public clarification which provides certain grace period to update information in tax records of the registrants without the imposition of penalties.

Key aspects of the Public Clarification
  • At the outset, it should be noted that Cabinet Decision No. (74) of 2023 read with the Federal Decree-Law no.28 states that a registrant shall notify the FTA, in the form and manner approved by it, within 20 business days from occurrence of any change to its data kept with the FTA, including:
    1. Name, address and email address.
    2. Trade licence activities.
    3. Legal entity type, partnership agreement for unincorporated partnerships, and articles of association or their equivalent.
    4. Nature of the business of the registrant.
    5. The address from which any aspect of business is conducted by the registrant.
  • There is an administrative penalty prescribed for not updating/delay in updating the tax records. In order to encourage the registrants to make such updates to their information with the FTA, the FTA has introduced a grace period within which if the requisite amendments and updates are made about the change in the details available with the FTA, there will be no administrative penalty levied.
  • The grace period has been provided for registrants who have fallen behind in updating their tax records for a period starting from 1 January 2024 to 31 March 2025.
  • The following additional clarifications are provided along with the grace period:
    1. Penalty Reversal: If penalties were imposed on registrants during the grace period due to failure to update their records, those penalties will be reversed by the FTA.
    2. Automatic Refund: For registrants who have already paid administrative penalties, the refunded amount will be credited back to their tax accounts, without requiring any action on the registrant's part.
  • The FTA has also, provided certain examples of the information which is required to be amended with the FTA and failure of which may lead to penalties. These are as under:
    1. New Branch: Failing to inform the FTA and upload the trade license for a new branch within the prescribed timeline.
    2. Address Change: Failing to notify the FTA of a business relocation.
    3. VAT/Excise Tax Updates: Failing to update VAT/excise tax records on time before registering for corporate tax.
    4. Incorrect Corporate Tax Details: Registering for corporate tax with incorrect details and not correcting them within the timeline.

The grace period allows registrants to address these updates without penalties, supporting accuracy in tax records without added administrative burdens.  
  1. Article 1 of the Federal Decree-Law No. 28 of 2022 on Tax Procedures and its amendments defines the term "registrant" as the taxable person who has been issued a tax registration number.
  2. Cabinet Decision No. (74) of 2023 on the Executive Regulation of Federal Decree-Law No. (28) of 2022 on Tax Procedures.
  3. Cabinet Decision No. 40 and Cabinet Decision No. 75 (Penalty leviable ranges from AED 1,000 to AED 10,000).
Our Comments
The FTA's decision to grant a grace period for updating taxpayer information without administrative penalties is a welcome initiative, allowing taxpayers to correct their records without immediate consequences. The registrants must now ensure that their tax details on the Emara Portal are verified and necessary changes are made by 31 March 2025, to avoid imposition of penalties.

Once this grace period ends, taxpayers must ensure that all future amendments are submitted within the prescribed 20-day timeframe, else penalties will be applicable.
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