The case involving the calculation method of the late payment penalties on voluntary disclosures has been adjudicated by the Federal Supreme Court of the UAE (herein the Court). The Court has taken an opposite position to that of the tax dispute resolution committees, and the Federal Primary and Federal Appeals Courts on this matter.
On 14 October 2020, the Court ruled that late payment penalties are still applicable, even when a voluntary disclosure is submitted.
According to the decision "necessary to impose a late fine for delay in payment" in such a case. The Court rules that the voluntary disclosure constitutes an amendment of the original return.
Based on this reasoning, the Court ordered that late payment penalties should apply retrospective to the voluntary disclosure, calculated as of the date of the original tax return.
Example: Taxpayer discovers a mistake in a tax return from March 2019 and files a voluntary disclosure an April 2020. According to the Court’s judgement, the late payment penalties up to 300% would be calculated as of March 2019, not April 2020.
It is important to note that Courts in the UAE do not set precedent.