One of the most certain scenarios for a business entity is the tax calculations and payment proceedings on a periodical basis. As per the rules stated by the UAE government, the business entities Must submit VAT/Excise returns either monthly or quarterly. The VAT was introduced effective from 1.1.2018 and it turns out to be a second source of revenue for the United Arab Emirates that enables the government to take necessary steps in building the infrastructure and well-being of the nation. However, a business entity must be aware of the tax penalty settlement that might occur during certain special emergency cases.
This guide highlights the tax and administrative procedures to be followed in such situations.
Special Case 1: In Cases of Death or Missing
In the cases of death, the tax payment procedure will be cleared as follows:
- For the payable tax owed by a natural person prior to the date of his/ her death, the payment shall be made from the value of the elements of the legacy or the income arising thereof prior to its distribution from the heirs or legatees.
- In case if the payment is not made by the heirs or legatees, legal actions will be imposed for the non-payment of the outstanding tax. A clearance certificate needs to be obtained from the governed authority to state the clearance of the proceedings.
- If a situation arises that the taxable person is absent or missing, then the appropriate taxable amount needs to be borne by their legal representatives.
- If the taxable person turns out to be incapable, the amount is to be paid by the legal representative from the funds and assets of the taxable person.
Special Case 2: In Case of Bankruptcy
In case if bankruptcy takes place, the payment proceedings are to be conducted in the following manner:
- The appointed trustee needs to communicate with the authority and inform about the due tax (or) to perform the tax audit for a specific duration.
- The Authority shall notify the trustee regarding the amount of the tax due within 20 business days after being notified by the Trustee.
- The Trustee may object or appeal against the settlement amount highlighted by the Authority.
- The Executive regulation shall specify the relevant procedures with the Authority, grievance, objection and settlement of the amount due.
It can be seen that such instances might occur at any point in time and turns out to be a complicated one. Therefore, the Emirati government mandates the business entities to maintain proper recording of their bookkeeping and accounting records by outsourcing the same to certified professional experts.
