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VAT Administrative Penalties – Extended Grace Period Conditions

Redetermination of Administrative Penalties – Grace period extended to 31st December 2022

In April 2021, Cabinet Decision No.49 of 2021 was issued where in amendment were made for some of the administrative penalties applicable to certain violations. This allowed a re-determination of the penalties already imposed subject to fulfilment of conditions by 31st Dec 2021.

Cabinet Decision 49 of 2021 was amended by Cabinet Decision No.108 of 2021 which further extended the grace period to benefit from the Redetermination to 31st December 2022.

The Federal Tax Authority (FTA) has issued public clarification TAXP004 replacing the earlier clarification TAXP002 which specifies the conditions for Redetermination of Administrative Penalties with the extended date.

The FTA clarified that tax registrants who had not met the necessary conditions to benefit from the administrative penalties’ re-determination by 31st December 2021, can do so by ensuring they meet the following conditions by 31st December 2022:

  1. The administrative penalty should have been imposed under Cabinet Decision No. 40 of 2017 before 28th June, 2021 and the amount due was not settled in full before that date.
  2. The tax registrant has settled all payable tax by 31st December, 2022 (which means that the registrant must not have any tax due at the end of year 2022).
  3. The tax registrant has settled 30 percent of total unpaid administrative penalties due until 28th June, 2021, no later than 31st December, 2022.

Where the conditions were not satisfied on 31 December 2021 but were satisfied on 31 December 2022, the FTA will redetermine the penalty within 30 business days from 31 December 2022 and waive off 70% of the penalty due prior to 28th June 2021.

The FTA indicated that the review of some tax registrants’ records is still ongoing to identify anyone else eligible to benefit from the re-determination of administrative penalties scheme.

FTA called on tax registrants who received notifications to provide the FTA with supporting data, to submit the required information without delay so that the FTA team may complete the procedures for reviewing such records and implement the re-determination of administrative penalties on the accounts of eligible registrants.

Download Public Clarification TAXP004
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