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Tue 14 Jan 2020 02:12 PM

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VAT and excise issues dominate Dubai tax dispute cases in 2019

Dubai-based lawyer says cases usually involve large companies, especially drinks and tobacco distributors

VAT and excise issues dominate Dubai tax dispute cases in 2019

Thirty-eight cases were heard by Dubai’s tax dispute resolution committee last year, with the majority focusing on value-added tax (VAT) and excise duties, according to a lawyer familiar with the cases.

Tax dispute resolution committees were established in Abu Dhabi, Dubai and Sharjah in 2017 and although submission started in 2018 the first hearings were not held until early 2019.

The Dubai committee began operations in March 2019 and, over the course of the year, 38 cases were heard.

“I was involved in about a quarter of them, either as direct counsel or as co-counsel or where the taxpayer already had a lawyer but they wanted a second collegial opinion,” Mahmoud Abuwasel, managing partner and head of corporate and tax disputes at legal firm Wasel and Wasel, told Arabian Business.

“When we talk about tax we're talking about mostly VAT and excise. It's mostly VAT. However, the companies that are subject to excise tax are usually higher value companies... A lot of [the cases] are to do with penalties, penalties that the federal tax authority applies, they're usually late penalties, but they can be for other things like voluntary disclosures and so on,” he added.

Abuwasel said the companies that dispute excise taxes are typically large, fast-moving consumer goods companies, which distribute energy drinks and sugary drinks, or tobacco companies. Those involved in VAT disputes are mostly large banks, large insurers or large property contractors.

“UAE laws and by-laws making up the tax legislation have an explicit requirement for the taxpayer to pay all taxes and penalties due before being able to resort to a tax dispute resolution committee, and subsequently, the federal courts. The rule is generally known as ‘pay now, argue later’,” Wasel and Wasel said in a statement.

He added that the cases that come before the committee are usually large companies, with large tax amounts involved, as these “companies have the pockets to pay for the tax advisers”.

Rulings are generally not made public, but the only case reported in the media was that involving Dubai Refreshments in April. Dubai’s Federal Tax Authority (FTA) claimed that Dubai Refreshments – the company which distributes Pepsi products in the UAE - owed it AED20.8 million ($5.6 million) in excise duty.

The Dubai tax resolution committee ruled that Dubai Refreshments only owed AED8.8 million in taxes and ordered the FTA to repay Dubai Refreshments AED12 million, according to a report by Gulf News.

VAT was introduced to the UAE in January 1, 2018 and on October 1, 2017 excise duty on sugary drinks, energy drinks and tobacco was increased to 50 percent.

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