UAE Tax Agents to Face Penalties for Incorrect Advice on Corporate Tax Starting July 1

UAE Tightens Oversight on Tax Agents: Penalties for Misguidance Effective July 1

In Dubai, the operational landscape for registered tax agents in the UAE is undergoing further scrutiny and regulation, with recent guidelines outlining stringent penalties for providing erroneous advice on corporate tax obligations. These penalties, known as ‘black points,’ are set to be enforced starting July 1, supplementing existing requirements for practicing tax agents in the UAE.

According to Jeet Gianchandani, Chairman of JCA consultancy, the Federal Tax Authority (FTA) is taking decisive steps to elevate standards for tax agents, aligning them with international best practices. Gianchandani elaborated, stating that the introduction of the ‘black points’ system aims to hold tax agents, whether individuals or businesses, accountable for acts of misconduct and negligence. This includes instances where clients receive incorrect advice, potentially leading to adverse financial implications. Gianchandani emphasized that the implementation of these new standards by the FTA underscores the imperative for tax agents to continuously update their knowledge and remain abreast of evolving regulations.

The application of the FTA’s new ‘black points’ system will be structured based on the nature of the violation:

• In cases where a violation is committed by an agent not directly associated with the corporate entity, black points will be allocated to the individual.
• If a violation involves an agent employed by the client, both the individual agent and the corporate client will incur black points.
• Violations attributable to a representative of a corporate tax agent, affecting the client, will result in black points for both the individual agent and the tax agency.
• In instances where a violation involves a representative of a tax agency but does not directly impact the client represented, only the individual agent will receive black points.

Becoming a registered tax agent in the UAE already entails meeting stringent requirements, with individuals mandated to accumulate a specified number of continuous practice education (CPE) hours. Gianchandani emphasized that many professional institutes now require their members to attend educational conferences or seminars to accrue these hours, highlighting the importance of ongoing professional development. He stressed that achieving and maintaining tax agent status demands a commitment to continuous learning and professional competence.

Tax agents play a pivotal role in the UAE’s evolving corporate tax landscape, serving as intermediaries between clients and the FTA and facilitating the filing of annual tax returns. The FTA mandates that practicing as a tax agent necessitates registration and accreditation, underscoring the importance of compliance with regulatory standards.

To qualify as a tax agent, individuals must meet specific criteria, including:

• Holding a Bachelor’s or Master’s degree in tax, accounting, or law from a recognized educational institution, or possessing a tax certification from an internationally recognized tax institution.
• Accumulating at least three years of recent professional experience in tax, accounting, or law.
• Demonstrating proficiency in both Arabic and English, both in written and spoken communication.

Penalties for tax agents extend beyond providing incorrect advice, encompassing various acts of omission or commission. For instance, disclosing client information without written consent may result in a deduction of 100 points, except under specified legal, professional, or regulatory obligations.

Additionally, promoting or designing aggressive tax planning strategies, intended to circumvent laws or compromise the integrity of the tax system, could lead to a deduction of 200 points.

According to Gianchandani, adherence to the prescribed code of conduct and the avoidance of incorrect advice are paramount for tax agents. He emphasized the necessity for tax agents to possess the requisite knowledge and experience to effectively serve their clients, drawing parallels with the expectations placed on professionals in other fields such as medicine and law.