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Huge relief for taxpayers: Penalties relaxed under VAT Law.

Huge relief for taxpayers: Penalties relaxed under VAT Law.


A decision was made by the Federal Tax Authority by issuing Decision No. 49/2021, it was an amendment to the earlier decision, Decision No. 40/2017 pertaining to the tax penalties imposed for the violation of the tax laws. Earlier, with the old regulations, people had to face huge tax penalties for the violation of VAT or excise duty. Although, the old law was aimed at reducing the non-compliance of the law and making people comply with the tax liabilities, it placed a huge burden on the tax bearers who had committed the violation just as a mere mistake without intentions and there was no way for them to make it right, rather they had to face the liability. In addition to that, the old law was incompetent to clarify about certain areas where the clarity was needed. As a result the FTA has issued two regulations to clarify the earlier regulations:

TAXP001: it is an amendment to the penalty regimes
The regulation was issued in order to provide detailed information on the amendments that are made in the decision no. 49/2021. It enumerates the penalties owing to few violations as per the decision no. 40/2017. While comparing the penalties in both the decisions, it is observed that some of the penalties are either reduced, amended or the mechanism of their calculation has been changd. In addition to this the new decision provides with the dates as to when these penalties will be imposed.
TAXP002: The following regulation was to re-determine the penalties that are levied before old resolution came into effect. It provides with certain conditions which the public has to fulfil in order to re-determine the penalties that were levied on them before the old resolution. It enumerates that following the conditions below, the penalties that were charged under the old resolution and are not paid yet will be reduced to 30% of the total unpaid penalties. The conditions that must be fulfilled are:
The penalties were under the old resolution
All the taxes that are due to the registrant are paid till 31st December, 2021
Till 31st December, 2021, the registrant was successful in paying the 30% of the unpaid amount of the penalty that is registered
Other than this, the FTA has also amended The Executive Regulations of Federal Law on Tax Procedures by a resolution no. 51 of 2021. It lays down the amendment in procedures that are carried out in day t day activities of the business. The amended areas under this resolution are, what is the definition of accounting records and commercial books, what is the method of keeping them., what shall be the period of record keeping, what is the procedure of tax registration or its deregistration, how can the details of registration be amended and the procedure of voluntary disclosure.

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