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From now on, even voluntary disclosures will be treated as a late payment issue. Businesses cannot get away with paying a token administrative penalty. Image Credit: Shutterstock

Dubai: In a significant development, voluntary disclosures made by UAE based businesses on their actual VAT obligations will be charged with late payment penalties, reaching up to 300 per cent of the dues.

Not just that, the penalties will apply from the due date of the tax return – and not from the date of voluntary disclosure. This is according to a ruling by the UAE Federal Supreme Court judgment on an appeal filed by the UAE Federal Tax Authority.

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“Based on this judgment, taxpayers submitting voluntary disclosures could be subject to penalties of up to 356 per cent of the tax due,” says an update on the ruling issued by the law firm firm Baker McKenzie Habib Al Mulla.

“The Federal Supreme Court’s judgment reverses the position that had been established over the past 18 months.”

During this period, penalties imposed were limited to administrative ones. But now, “the Federal Supreme Court takes the view that voluntary disclosures are merely amended tax returns in nature.

“This is a major development in the UAE tax landscape, as the judgment may affect upcoming decisions to beissued by the various Tax Dispute Resolution Committees and Federal Courts.

“We expect that this judgment will have a significant impact on critical business sectors involved in transactions.”