TAX PENALTY AMNESTY
Redetermination of existing penalties
The new Cabinet Decision grants the FTA the right to reduce unpaid penalties by 70% subject to the following conditions:
Other penalty reductions
The amendments create an incentive for businesses to review their historic filing positions and to voluntarily disclose any errors before they are notified of an audit. For example, if a taxpayer on 1 July 2021 voluntarily discloses an error in its June 2019 VAT return and pays the associated tax within 20 days, there will be no late payment penalty and a 10% variable penalty will apply. However, where the FTA issues an assessment on 1 July 2021, this variable penalty would increase to 146%, on the assumption that the associated tax shall be settled within 20 days of filing of the voluntary disclosures.
Businesses should also review any outstanding penalties to determine if they can benefit from relief
The changes in penalties are summarized below
Fixed penalties REGULAR PENALTY PENALTY UPTO
Where additional VAT liabilities arise from a voluntary disclosure or a tax assessment, the new rules represent a significant change as taxpayers will now be given 20 days to settle any underpaid tax before late payment penalties will apply.
The due date for the calculation of the late payment penalties in this instance would be as follows:
Variable penalty where a voluntary disclosure is submitted before the taxpayer is notified of an audit by the FTA
The penalties now range from 5% to 40% depending on when the taxpayer submits the voluntary disclosure.
REGULAR PENALTY PENALTY UPTO
Year in which error 31/12/2021
Variable penalty where a voluntary disclosure is submitted/tax assessment is received after the taxpayer is notified of an audit by the FTA
There is a significant increase in the penalties where an error is corrected after the taxpayer is notified of an audit by the FTA.
Previous penalty ( REGULAR PENALTY)
New Penalty (UPTO 31/12/2021)