All taxpayers should take note of the UAE Federal Supreme Court’s first ruling on tax evasion in a criminal case.

Tax evasion, under the Tax Procedures Law is defined as“The use of illegal means resulting in the reduction of the amount of the Due Tax, non-payment thereof, or a refund of a tax that a person does not have the right to have refunded under any Tax Law.”

The criminal penalties which apply for committing tax evasion are significantly more severe than the administrative penalties that may otherwise apply where an entity makes a voluntary disclosure (VD) within the appropriate time limits. Depending on the circumstances, a prison sentence or monetary penalty not exceeding five times the amount of evaded tax or both may be imposed on the taxpayer in circumstances of tax evasion.

The potential implications of this ruling, coupled with the recent reduction in administrative penalties where a taxpayer submits a VD to the FTA, will encourage taxpayers to review their tax affairs and submit VDs where appropriate or seek further clarification from their adviser or the FTA. In general, taxpayers are required to submit a VD correcting an earlier error within 20 working days of becoming aware of that error.While submitting a VD within the permitted timeframe can significantly reduce administrative penalties, failure to submit a VD within this timeframe will result in additional penalties.

KPMG has a team of experienced tax specialists that can help you assess your current tax position, advise on the appropriate tax treatment, prepare clarification requests or represent you in front of the FTA as registered tax agents.

We are happy to discuss your specific circumstances with you and determine the way forward should you have any questions or concerns in this regard. Please get in touch with your usual KPMG contact or any of the tax professionals below.