Resolving Tax Disputes in the UAE – A Brief Guide for Companies

Learn how companies in the UAE can effectively resolve tax disputes with the Federal Tax Authority and protect their financial interests through the proper legal channels.

By Arendse Huld

Navigating the complex landscape of tax regulations in the UAE can be challenging for businesses, especially when disputes arise with the Federal Tax Authority (FTA). Companies operating in the UAE are subject to various types of taxes in the country, including corporate tax (CT), value-added tax (VAT), excise tax, and municipal tax, depending on the nature of their operations and location.

However, disagreements with the FTA’s decisions may arise, such as instances of penalties for alleged tax infractions, facing unexpected or miscalculated tax assessments, or being issued fines that the company deems excessive or incorrect. In such cases, businesses have the right to challenge these decisions through a formal reconsideration process, starting with the FTA itself and potentially escalating to a resolution committee or even the federal courts if necessary. Understanding this process and knowing when and how to dispute an FTA decision can be crucial for businesses seeking to protect their financial interests and ensure compliance with UAE tax laws.

Taxes in the UAE

Companies in the UAE are subject to various kinds of tax, depending on the type of business they conduct and where they are located.

These are:

• A 9 percent CT rate for taxable income above AED 375,000 (US$102,099);
• A 5 percent VAT rate on certain goods;
• Excise tax (dependant on goods handled); and
• Municipal tax (dependent on Emirate).

Companies must register before a certain deadline and then file and pay the necessary taxes within a certain time frame each year. Failure to file and pay taxes on time may result in varying levels of penalties depending on the severity and duration of the infraction.

Submitting a reconsideration request with the FTA

Companies in the UAE can dispute a decision made by the FTA on issues related to tax, including penalties for alleged infractions.

If a company disagrees with a decision taken by the FTA, it can submit a reconsideration request within 45 business days of the FTA’s original decision. The application must be in Arabic and can be submitted through the EmaraTax platform.

The application should normally be carried out by the person seeking the consideration, but can also be carried out by the company’s appointed tax agent or legal representative. For companies that are members of a tax group, the request should be submitted by the tax group’s representative member. Tax advisors are generally not permitted to submit a reconsideration request on behalf of the company.

Generally, the following materials must be presented when making the request:

• Documentary proof to support the factual and legal grounds for the request; and
• Any tax advice received relevant to the reconsideration request.

The FTA will issue its verdict on the request within 45 business days of receipt of the application, and notify the company of its decision within five business days of reaching the verdict.

Disputing a decision by the resolution committee

If the company disagrees with the decision reached by the reconsideration committee following a reconsideration request, it can raise the issue with the Tax Dispute Resolution Committee (TDRC) in the UAE’s Department of Justice (DOJ). The TDRC is an impartial committee consisting of two tax experts and chaired by a member of the Judicial Authority.

The company can also raise the dispute with the TDRC if the FTA does not respond to the original reconsideration request within the prescribed 45 business days.

However, companies are required to pay all taxes and penalties levied before going to the TDRC.

There are currently three TDRCs in the UAE, with each one tasked with attending to taxpayers in different parts of the country. These are:

• The Abu Dhabi Committee, which tends to applicants registered in Abu Dhabi and foreign applicants with no address in the UAE;
• The Dubai Committee, which tends to applicants registered in Dubai; and
• The Sharjah Committee, which tends to applicants registered in the emirates of Sharjah, Ras Al Khaimah, Ajman, Fujairah, and Umm Al-Quwain.

To file a case with the TDRC, applicants need to fill in the objection application form and send it to tax.disputes@moj.gov.ae along with supporting documentation. This includes:

• The objection decision issued by the FTA;
• The response of the FTA regarding the application for reconsideration of the objection; and
• Proof of payment of taxes and fines by the applicant.

The TDRC will allow the company and the FTA to provide feedback on the case and issue a verdict within 20 business days of receiving the request. This time frame can be extended for another 20 days if required.

Appealing a decision in federal courts

If the TDRC’s decision goes in favor of the FTA, the company can choose to appeal the decision with the federal courts. However, this is only possible for cases in which the final taxes and penalties due exceed AED 100,000 (US$27,226). If the full amount is under AED 100,000, the TDRC’s decision is final and cannot be further contested.

Companies must mount an appeal with the Federal Court of First Instance within 20 days of receiving the decision from the TDRC. If the company then wishes to further appeal a decision made by the Federal Court of First Instance, it can do so with the Federal Court of Appeal and Federal Supreme Court. The decision of the Supreme Court will be final and can no longer be appealed.

Legal proceedings in the federal courts may take between 12 to 24 months to conclude.

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