The UAE Cabinet decision to extend taxpayers' deadline is a 'reprieve' for businesses

The UAE Cabinet's decision to extend taxpayers' deadline to appeal for a waiver or reduction in penalties imposed by the Federal Tax Authority is a "reprieve" for businesses, according to tax experts.

Earlier procedures provided only 10 business days for a taxpayer to make an application for waiver to an FTA committee. This provision has now been modified to allow taxpayers 40 business days to submit their exemption or waiver request.

"This was a much-awaited change because 10 business days is not sufficient to prepare the application for waiver/exemption citing proper facts, grounds of appeal, supporting provisions and historical records," Anurag Chaturvedi, managing partner at Chartered House Tax Consultancy, told The National.

“With most businesses still working from home due to Covid-19, it was a challenge to collate all information in such a strict, time-bound manner.”

The UAE has introduced a number of changes in recent months to its tax and financial laws to attract foreign direct investment, create jobs and draw high-skilled talent as it builds the foundation for its next 50 years of growth and development.

The UAE Cabinet on Wednesday also extended the FTA’s time limit to respond to taxpayers’ request to waive or reduce penalties from 20 to 40 business days.

“Due to high number of requests submitted to the FTA for waiver, the agency amended its timeline to respond from 20 to 40 business days, which will help them to review each case in detail,” Mr Chaturvedi added.

The Cabinet has also approved changes to the UAE Bankruptcy Law, which was amended in September last year in response to the Covid-19 pandemic. The amendments allow for additional protections to debtors in the event of an “emergency financial crisis”, which was declared in January 2021 by the Council of Ministers to exist for the period of April 1, 2020, to July 31, 2021.

“Some of these protections include a suspension of the requirement to file in cases of insolvency, expedited claims relief and settlement procedures, and a suspension of any bankruptcy proceedings filed by a creditor during the emergency,” Barry Greenberg, who handles restructuring and bankruptcy, corporate, and insurance and reinsurance practices at law firm BSA Ahmad Bin Hezeem & Associates, said.

A debtor is normally required to file under the provisions of the Bankruptcy Law if it is unable to pay its debts within 30 days of their becoming due or is otherwise in a condition of insolvency, Mr Greenberg said.

However, according to Article 170 bis (2) of the law as amended, “the debtor’s obligation to submit the request to open the bankruptcy procedures shall be suspended temporarily until the end of the period of the emergency financial crisis”.

Although the process of a court-appointed expert administrating a claims settlement process can take many months, in case of an emergency declaration, this can be expedited with court approval and limited to a 40-day period, Mr Greenberg explained.

Under the amended Bankruptcy Law, the court can postpone consideration of any request submitted by a creditor to open bankruptcy procedures, if such request was submitted during the emergency financial crisis, until the emergency circumstances cease to exist, he added.