Tax evasion, as defined by the Federal Law on Tax Procedures, is the use of illegal means that result in a reduction in the amount of tax due, failure to pay it, or a refund of a tax that one has no right to recover in accordance with any tax law. Thus, it is advisable for business to seek the expert services of top Tax Consultants in UAE to effectively determine taxability and ensure compliance.
How Tax Evasion is Conducted?
There are many methods that tax evaders resort to in order to reduce the taxable value, and thus reduce the amount of tax payable. The most prominent of these methods are the following:
• The case of intentionally refraining from paying any due tax or administrative fines.
• In the case that amounts are imposed on customers and collected from them claiming that they are tax without being registered.
• Misusing or causing the destruction or theft of documents, papers or materials in the possession of the Federal Tax Authority.
• Preventing or obstructing the Authority’s employees while carrying out their duties.
• Reducing the value of actual works with the intention of not reaching the required registration threshold.
• Declaring incorrect information and data to the Federal Tax Authority.
• Reducing the tax payable through tax evasion or complicity in tax evasion.
And other methods that evaders may adopt, which ultimately lead to evading the payment of the tax, which has prompted many countries, including the United Arab Emirates, to surround their tax legislation with penal and administrative penalties imposed on those who evade the payment of the tax imposed on them, as it was issued The Federal Law of 2017 regarding tax procedures, and the Federal Decree Law of 2017 regarding value-added tax included provisions related to penalties imposed on tax evaders.
The Importance of Imposing Punishment on Tax Evaders
This comes because VAT and other taxes are important in diversifying the state’s sources of revenue, and thus collecting taxes enables it to continue providing its public services to future generations with a high level of quality and effectiveness, which necessitated the imposition of penalties against those who evade paying the due tax. on him.
The UAE legislator stipulates that punishing a tax evader does not mean exemption from paying taxes imposed on his business, and stipulates that imposing a penalty does not exempt any person from paying them, or any other fines based on the penalty imposed on him under the provisions of this law or any another tax law.
The Mechanism by which Tax Evasion is Reported
This mechanism is represented by the tax audit, the tasks of which are carried out by the Federal Tax Authority. It can carry out the audit at the Authority’s headquarters, at the place of work of the person subject to the audit, or any other place where this person conducts business, stores goods, or keeps records, provided that in the event In which the Authority decides to conduct an audit at a person’s place of work, it must inform him at least five working days before carrying out the tax audit.
The above-mentioned reporting is not obligatory, as the Tax Legislation Law stipulates cases in which an audit is carried out in the workplace without notification and this results in a temporary closure of the place for a period not exceeding (72) hours, in the following cases:
• If the Authority has serious reasons to believe that the person subject to the tax audit is participating or has been involved in tax evasion with respect to that person or another person.
• If the Authority has serious reasons to believe that not temporarily closing the place where the tax audit process is held may cause obstruction of the procedures.
• If the person who was previously notified of the tax audit begins to prevent the tax auditor from entering the place where the tax audit will be held.
Tax obligations and controls
An unregistered taxable person or any other person under the law has the right to apply for registration in the Authority’s register after fulfilling the conditions. He will then be given his own tax registration number, according to which he is obligated to deal with the Authority or with third parties in all his correspondence and dealings in accordance with the provisions of the tax law.
The Tax Procedures Law also obligated the Chargé affairs to maintain accounting records and all information and data related to tax transactions, and to submit the tax declaration, data, information, records and documents to the tax and translate them into Arabic.
The taxable person must, in accordance with the tax law, prepare his own tax return for all tax periods in which he worked during the period of his registration and submit it to the Authority. Any incomplete tax return submitted to the Authority is not accepted unless it contains the basic data specified by the tax law.
The taxable person must pay any tax payable as specified in the tax return or pursuant to the tax assessment and pay the administrative fines imposed on him within the period specified by the law.
The Authority of the Federal Tax Authority to Obtain Records
Tax auditors in the Federal Authority have broad authority while carrying out their work, as they can obtain original records and copies of them and take samples of goods, equipment or other assets from the place where the person subject to tax audit carries out his business or that are in his possession or seize them in accordance with the controls that determined by the executive regulations of the Tax Procedures Law.
Completion of Tax Audit Procedures
Upon completion of the tax audit procedures, the Authority shall inform the subject of the audit of the final result within the period specified for that in accordance with the executive regulations of the Tax Procedures Law. In all cases, the Authority has no right to initiate criminal proceedings except upon the request of the Director of the Authority.
Penalty for Tax Evasion
If an unregistered person obtains goods claiming to be registered for the purpose of tax evasion, he shall be punished with imprisonment and a fine not exceeding five times the amount of the tax that was evaded, or with one of these two penalties.
Cases in which the penalty for tax evasion applies
• The taxpayer refrains from paying any tax due, intentionally or unintentionally
• A taxable person who reduces its actual value to evade registration
• If a person who is not registered for tax collects its value from his clients
• Whoever provided false information, data, and false documents for taxes
• Whoever conceals or destroys documents, data or materials, and is obligated to preserve them, or misuses them
• Whoever obstructs and prevents the Authority’s employees from carrying out their duties
• Who colluded with a tax evader.
Contact Top Tax Consultants in UAE
The law mandates joint and several liability for individuals found involved in tax evasion, whether by directly or indirectly facilitating it, or aiding the taxpayer in avoiding payment of due taxes or administrative fines. It’s essential to understand that being penalized under the Federal Tax Procedures Law or any other legislation doesn’t absolve anyone from their obligation to settle the taxes owed per this law or any other tax regulation. Reach out to VAT Registration UAE today for assistance, and we’ll be happy to help.
