UAE Federal Tax Authority releases Tax Procedures Guide on Private Clarifications

Introduction

The Federal Tax Authority (FTA) has released Tax Procedures Guide on Private Clarifications (TPGPC1), which provides further guidance on the process to obtain a Private Clarification from the FTA.

As a general overview, Private Clarifications are clarifications which are issued by the FTA upon request from a taxpayer (named Applicant) in relation to a specific technical tax matter. These clarifications are responded by the FTA strictly on the basis of the facts, information and documentation provided by the taxpayer in the request. Whilst the FTA may request additional information previous to responding, no verification is made on the facts provided by the person submitting the request.

As opposed to Public Clarifications, Private Clarifications are only applicable to the Applicant with respect to the specific questions raised in the request and taxes indicated. In parallel, the FTA is administratively bound to follow the position established in the Private Clarification, as long as there is no material deviation from the factual circumstances, as reflected in the request.

 

Eligibility for a Private Clarification

a. Eligible persons

Only certain persons are entitled to apply for a Private Clarification with respect to specific matters, as per the below detail:

• A person seeking clarification for a specific tax matter which refers to that specific person;
• The representative member of a Tax Group in the name of the whole group;
• A person's tax agent or legal representative on behalf of the person seeking clarification and only in relation to the specific tax type to which the request relates; and
• In exceptional cases, more than one person jointly, if the clarification relates to the same background and transaction.

b. Eligible matters

The Guide specifies that Private Clarifications can only be requested in relation to specific tax matters, which comply with the following requirements:

• The request shall relate to federal taxes or relevant penalties;
• The request shall indicate the tax type to which it relates;
• The request shall relate to tax legislation as applied to the facts and circumstances of the taxpayer; and
• The request shall include all relevant information which the FTA needs to consider in order to issue a response.

Where the above requirements are not met (for example when the clarification request refers to issues which are out of scope, or the clarification is requested by one person but refers to another), the FTA can reject the application.

 

Private Clarification process

Clarification requests are filed through the EmaraTax portal and can be submitted both in English and Arabic (with the corresponding response issued in the same language). The clarification request follows a specific form which needs to be completed and filed along with the following supporting documentation:

• A cover letter which describes the background facts, tax technical query, relevant tax legislation considered, the Applicant’s technical view as well as any alternative tax treatment;
• Documentary evidence relating to the request, for example contracts, invoices, correspondence etc.; and
• If available, tax advice received from third parties in relation to the matter on which the clarification is requested.

Prior to submission, the Applicant must pay the corresponding fees (i.e., AED 1,500 if it refers to one tax and AED 2,250 if it refers to more than one tax) through the portal. Upon payment and submission, the Applicant will receive a unique clarification request number, linked to its Tax Registration Number (TRN).

Once submitted, the FTA will review the eligibility criteria in the terms described above. If accepted, additional information may be requested from the Applicant, which shall be provided to the FTA within 40 business days. If the additional information is not provided within such deadline, the FTA may automatically close the request.

The FTA shall respond within the following deadlines:

• If the clarification request refers to indirect taxes (i.e., Excise Tax and Value Added Tax), within 50 days starting from the date on which the clarification request was received or from the date on which additional information was provided to the FTA (if requested).
• If the clarification request refers to Corporate Income Tax, within 60 days starting from the date on which the clarification request was received or from the date on which additional information was provided to the FTA (if requested).

An extension of the deadline may be requested by the FTA if the clarification relates to complex tax matters which require further interaction with other stakeholders.

 

Conclusion

The Private Clarification process provides taxpayers with an alternative mechanism to gain clarity on the tax treatment of a specific transaction where there is uncertainty under the applicable tax legislation.

Where tax positions are uncertain, we encourage taxpayers to seek guidance on specific tax matters through the Private Clarification process, to ensure an adequate treatment aligned with the applicable regulations.

 

References

• Private Clarifications Tax Procedures | TPGPC1