Tax evasion is the use of illegal sources or means to reduce the amount of the tax due, a refund of tax,
or non-payment. Taxes in the UAE are not implemented on everyone, only taxable people, which are
those who exceed the certain set net worth or profit set by the tax authorities are obliged to pay tax.
- Any criminal liability in case of Tax Evasion?
The Federal Tax Authority (FTA) will impose tax evasion penalties on a taxable person if this person was
deliberately unsuccessful in settling the payable tax. The Article (26) of the Law No.7of 2017 presents
the penalties that the law has established for criminal activities of taxpayers in the country, related to
the tax procedures. The Article (26) has established that, the FTA can now impose a prison sentence and
monetary penalty not exceeding five times the amount of evaded tax or either of the two, shall be
imposed on:
a. A Taxable Person who deliberately fails to settle any Payable Tax or Administrative Penalties.
b. A Person who deliberately understates the actual value of his Business or fails to consolidate his
related Business with the intent of remaining below the required registration threshold.
c. A Person who charges and collects amounts from his clients claiming them to be Tax without
being registered.
d. A Person who deliberately provides false information and data and incorrect documents to the
Authority.
e. A Person who deliberately conceals or destroys documents or other material that he is required
to keep and provide to the Authority.
f. A Person who deliberately steals, mis-uses or causes the destruction of documents or other
materials that in the possession of the Authority.
g. A Person who prevents or hinders the Authority’s employees from performing their duties.
h. A Person who deliberately decreases the Payable Tax through Tax Evasion or conspiring to
evade Tax, depending on the specific taxpayers and their activities thereof.
- Measures taken in the UAE to enhance tax compliance
The UAE has recently introduced several measures to enhance its tax compliance framework and to
combat tax evasion. Some of these measures include:
- The establishment of a whistleblower system for violations and tax evasion (“Raqeeb”)
by the Federal Tax Authority (FTA) in April 2022. The system allows individuals to report
suspected cases of tax evasion or non-compliance by natural or legal persons, and to
receive monetary rewards if certain conditions are met. - The issuance of the first ruling on tax evasion by the UAE Federal Supreme Court in
September 2021. The ruling affirmed that a taxpayer who deliberately understated his
taxable income and failed to disclose his bank accounts was guilty of tax evasion and
liable for criminal penalties. - The reduction of administrative penalties for taxpayers who voluntarily disclose errors
or omissions in their tax returns within 20 working days of becoming aware of them. The
reduced penalties range from 5% to 40% of the unpaid tax, depending on the timing and
nature of the voluntary disclosure.
These developments indicate that the UAE is taking a serious stance against tax evasion and non-
compliance, and that taxpayers should be vigilant and proactive in ensuring their tax affairs are in order.
Taxpayers should review their tax positions and transactions regularly, seek professional advice where
necessary, and submit voluntary disclosures where appropriate to avoid harsher consequences.
Taxpayers should be aware of the recent developments and implications in the UAE tax compliance
framework, and take appropriate steps to ensure their compliance with the applicable tax laws.
