Tax Dispute Legitation Process

The process of tax dispute litigation in the United Arab Emirates (UAE) describes the legal framework that allows the taxpayers to challenge decisions made by the Federal Tax Authority (FTA). As the VAT regime continues to evolve within the UAE, it is crucial for taxpayers to be aware of the measures allowed and procedures involved in tackling tax issues. This article aims to explore the essential steps required to manage tax disputes in the UAE.

Tax Dispute Legitation Process in the UAE

• Settling Tax and Penalties

VAT is an indirect tax in the UAE implemented in line with the value of the goods or service being supplied. Business and individuals are required to determine and declare the tax amount due or to be refunded for each tax period. The process of appealing an FTA decision is deemed to be lengthy, however in a bid to avoid other time-based penalties it is advisable that every taxpayer, who disagrees with the amount due as well as the penalties stated in the FTA decision, should pay the amount of tax and other penalties that the FTA decision contains in order to avoid being penalized further. This ceases accumulation during the course of the dispute.

• Application for Reconsideration

Taxpayers can submit an ‘Application for Reconsideration’ directly to the FTA if they disagree with a decision, provided it is filed within 20 business days of the decision along with details and evidence to support reconsideration. The application must be in Arabic. The FTA has 25 business days to respond.

• Objecting to the Tax Dispute Resolution Committee (TDRC)

If the dispute is unresolved after reconsideration, taxpayers can object to the relevant TDRC. Key requirements include settlement of all tax and penalties, prior reconsideration application, and objecting within 20 business days.

Table 1: Relevant TDRC by taxpayer location

The objection documentation must be submitted to the TDRC in Arabic, including an explanatory memorandum and all supporting documents. It is recommended to engage UAE tax and litigation specialists to assist with the objection documentation.

• Decision of Tax Dispute Resolution Committee

The TDRC must decide within 25 business days, extendable to 45 days. Moreover, decisions under AED100,000 are final, whereas, for disputes over AED100,000 the decision can be appealed to the Federal Court of First Instance within 20 business days.

• Appeal to the tax dispute adalah

For tax disputes in UAE and penalties exceeding AED100,000, either party can appeal a TDRC decision to the Federal Court of First Instance within 20 business days, which is the competent tax dispute adalah for deciding such appeals. In most cases the court will appoint tax experts to evaluate the merits of the appeal, and dissatisfied parties can further refer the case to the Federal Court of Appeal. Even if the appeal process is intended to run smoothly, in practice it can take even over a year, if the appeals are going through the higher courts, and this will make the expenses even greater. Due to the fact that tax litigation entails technicalities, it becomes necessary for appellants to retain qualified UAE tax and litigation lawyers to enable them to fully understand and deal with the legal processes as well as to argue tax matters before the courts.

• Non-TDRC Tax Disputes

Tax disputes in UAE may also occur in contract relations between taxpayers on the proper accounting treatment of taxes without the participation of TDRC. Where a case does not come under TDRC jurisdiction, the interested party ought to file for civil litigation in the courts of the first instance of the respective emirate through the course of normal legal processes. However, owing to the tax issues, courts routinely appoint expert advisors to aid in resolution. Additionally, parties require support from tax specialists and counsel given the technical nature of the matters. Depending on the size of disputed amounts, decisions may be appealed through the Court of Appeal, including its designated tax department, and ultimately to the Court of Cassation. Thus, while outside the formal TDRC process, tax expertise remains pivotal for efficiently navigating case presentation and engaging with any court-appointed tax experts in these contractual tax disputes in UAE.

Settlement with Federal Tax Authority 

To settle tax disputes and litigation in the UAE, businesses require technical tax expertise and experienced litigation support for which key stakeholders include taxpayers, tax agents, tax lawyers and advisers. Moreover to settle the payment with FTA the following methods should be considered:

Table 1: Payment Methods for Settlement with FTA

How to manage a tax dispute?

To manage a tax dispute, taxpayers should consult professionals, be aware of the process, collect documents, meet deadlines, and consider the next steps for reconsideration, objections, or courts when necessary and ideally with a lawyer for the administration of taxes.

Thus, to summarize, recognition of the tax dispute registration process in the UAE enables taxpayers to manage tax disputes with the tax administrators effectively. Taxpayers can therefore seek professional assistance in guiding them through the reconsideration, TDRC objection, and court appeal processes to make the dispute resolution process faster and more efficient.