Introduction
UAE has launched a new mechanism called Tax Assessment Reviews to enables taxpayers to challenge their adverse tax assessments and associated penalties which they believe were issued due to procedural errors or miscalculations during an assessment or FTA audit. Under this an independent re-evaluation of tax assessments and associated penalties is undertaken by an independent team within the Federal Tax Authority (FTA) which enables correcting calculation and technical errors for a resolution in the first stage.
In today’s blog, we will breakdown key points, scenarios and insights of the process involved and cases where review applications can be filed and where a taxpayer should directly skip this process and proceed with filing a reconsideration/waiver request.
What is a Tax Assessment Review and what is its purpose?
The Tax Assessment Review is an independent review mechanism within FTA which is designed to allow taxpayers to rectify errors in tax assessments and related administrative penalties. This request is to be filed with the FTA before submitting a request for reconsideration/waiver.
The purpose of this review process is to facilitate correction of tax assessment or FTA Audit liabilities where due to technical errors, miscalculations, or procedural mistakes an incorrect value of liability is calculated or notice is issued for a period which is time barred.
When Can a Tax Assessment Review Be Requested?
A Tax Assessment Review can be requested if there are reasonable grounds to believe that an assessment contains any of the following errors:
1. Technical Errors
These errors occur when the FTA misinterprets or incorrectly applies tax laws, regulations, or international tax treaties, leading to an incorrect tax assessment.
2. Calculation Errors
Mistakes in tax computations, such as incorrect application of tax rates, miscalculation of taxable amounts, or errors in valuing supplies, can result in an inaccurate tax liability.
3. Procedural Errors
Assessments may be flawed due to non-compliance with prescribed audit procedures, including:
• Conducting an audit without providing prior notification to the taxpayer.
• Issuing an assessment based on undocumented or unverified third-party information rather than official taxpayer records.
• Failing to consider relevant documents that were submitted during the audit.
This review is based solely on existing facts and documents that were available to the FTA auditors at the time of the original tax audit or assessment.
Scenarios in which a Tax Assessment Review request can be raised with FTA
The scenarios that may warrant an Assessment Review are outlined below:
1. Assessment for a Tax Period Barred by Statute of Limitations: Tax assessments should not be issued for periods beyond the statute of limitations (five years from the end of the relevant tax period).
Example: A business receives an audit notification in 2024 for the 2018 tax period, even though the five-year limitation has expired. In such a case, the FTA is time barred to conduct a tax audit or issue an assessment and therefore the taxpayer can request a review citing the limitation period.
2. Lack of Prior Audit Notification: The FTA is required to notify a taxpayer before initiating a tax audit. If an assessment is issued without prior notification, it violates due process, making it eligible for review.
Example: A taxpayer is unexpectedly issued a tax assessment for a previous period without receiving an audit notification. Since the audit process should begin with a formal notification, the taxpayer shall file a review application.
3. Reliance on Undocumented Third-Party Information: Tax assessments must be based on verifiable evidence and if FTA relies on unverified third-party confirmations to determine tax liabilities, the taxpayer can challenge the assessment.
Example: A company sells taxable goods and reports sales figures accurately. However, the FTA issues an assessment based on third-party confirmations from a supplier, which are not documented or supported by official records. The company may request Tax Assessment Review, arguing that tax should be assessed based only on official records.
4. Errors in Tax Calculation or Valuation of Supplies: Mathematical errors, misclassification of supplies, or incorrect application of tax rates can lead to inflated tax liabilities.
Example: A taxpayer declares taxable supplies worth AED 500,000, but the FTA erroneously calculates tax based on AED 700,000, leading to an excessive tax liability. The taxpayer may request a correction through a Tax Assessment Review.
5. Assessment for Periods Outside the Audit Scope: An audit notification specifies which tax periods are under review and if the FTA issues an assessment for a period not included in the audit scope, it can be challenged.
Example: A company receives an audit notification covering 2020-2022 but later receives an assessment including 2019 transactions, which was not part of the audit scope. The company may a Tax Assessment Review, as it was not included in the original audit notification.
6. Non-Receipt of FTA Audit Assessment Report at the Registered Address: FTA Audit findings must be sent to the taxpayer’s registered address and if a taxpayer does not receive their audit results, they may miss deadlines for responding or filing objections.
Example: A company is issued an assessment but never receives the audit findings due to an FTA mailing error. If the taxpayer only becomes aware of the assessment after penalties are imposed, they may request a Tax Assessment Review citing non-receipt of the audit results.
Can New Evidence Be Submitted for Tax Assessment Review ?
No, the Tax Assessment Review is strictly limited to reviewing the original evidence and documents presented during the FTA audit or assessment. If additional information is to be submitted, then the appropriate step is to file a Request for Reconsideration/Waiver and skipping this process altogether.
Submission Process & Deadlines
1. How to Submit a Request
To initiate a Tax Assessment Review, taxpayers must submit a formal request to the FTA via email at AssessmentReview@tax.gov.ae.
The request should include:
• A clear and detailed explanation of the grounds for the review.
• Supporting evidence demonstrating errors in tax calculation, technical misinterpretations, or procedural lapses.
• Relevant documents that were available to the FTA during the original tax audit, as no new information can be introduced.
2. Deadline for Submission
A request must be filed within 40 business days from the date the taxpayer is notified of the tax assessment.
If a taxpayer is unable to meet the 40-day deadline, they may apply for an extension, provided they offer a valid justification and the FTA considers it acceptable.
3. Review & Decision Timeline
The FTA evaluates the request and issues a decision within 40 business days from the date of submission. Once a decision is made, the taxpayer is notified within 5 business days.
4. Possible Outcomes of a Tax Assessment Review
Once the Federal Tax Authority (FTA) reviews the Tax Assessment Review request, it may either reject, adjust, or uphold the previously issued tax assessment. A rejection may occur due to non-compliance with procedural requirements, such as failure to file within 40 business days, lack of sufficient supporting evidence, or submission of new information that was not part of the original audit.
Next Steps if Disagreement Arises
If the request is rejected, it is crucial for the taxpayer to take further action by filing a Reconsideration Request with the FTA within the prescribed timeline. However, a Request for Reconsideration can only be submitted after completing a Tax Assessment Review (or if no decision is issued within the deadline).
How We Can Help
Navigating the Tax Assessment Review process requires a thorough understanding of UAE tax laws and audit procedures. Our expert team is here to assist you in assessing your eligibility for a Tax Assessment Review, preparing comprehensive and well-structured submissions, and providing guidance on your options following the review. Contact us today for professional assistance to ensure compliance and safeguard your business from unnecessary penalties.
