Understanding UAE’s New Tax Extension Rules: Legal Relief Under Ministerial Decision No. 1 of 2025

Timely tax compliance in the UAE is more than a procedural requirement—it is a legal obligation with serious implications for businesses and individuals alike. While missing tax review deadlines can expose taxpayers to penalties and enforcement action, the Federal Tax Authority (FTA) has recognized the need to accommodate exceptional circumstances through a new provision. As of March 2025, Ministerial Decision No. 1 of 2025 provides a structured process to request extensions for tax review and reconsideration requests—offering legal relief in genuine cases. This article explains the key legal provisions, eligibility for extension, implications of non-compliance, and available recourse.

Legal Framework for Tax Review and Reconsideration Request:

Under Federal Decree-Law No. 28 of 2022 on Tax Procedures, taxpayers are required to file requests for Tax Assessment Review or Reconsideration within 40 working days from the date of the decision issued by the FTA. Failure to comply within this window may result in administrative penalties, recovery actions, or enforcement measures such as audits or account freezes.

However, Ministerial Decision No. 1 of 2025 introduced an important legal amendment, allowing the FTA to accept delayed review requests under exceptional conditions. The objective of this relief is not to dilute tax discipline but to provide equitable treatment for taxpayers affected by unavoidable events.

Exceptions Permitting Late Submissions:

The Ministerial Decision outlines specific grounds under which delayed submissions may be accepted:

·      Medical emergencies, serious illness, or death of the taxpayer or legal representative.

·      Disruption due to force majeure, including natural disasters, war, or civil unrest.

·      Technical failures of FTA systems that prevent submission within the deadline.

·      Loss of records due to unforeseen events such as fire, flood, or cyberattacks.

·      Delays resulting from FTA’s own procedural requirements (e.g., pending documentation requests).

·      Other extraordinary crises substantiated with supporting evidence.

Each request must be supported by detailed documentation, such as medical reports, official notices, or third-party confirmations. It is also critical that the taxpayer demonstrates due diligence prior to the occurrence of the exceptional event.

What Does Not Qualify for an Extension?

The FTA will not entertain late submissions for a variety of reasons. These include negligence or oversight by the taxpayer or their tax agent, workload or internal delays in routine operations, and the complexity of the case or a lack of awareness regarding deadlines. Additionally, non-urgent personal or business reasons that do not directly affect the taxpayer’s ability to comply will not be considered valid grounds for an extension. Relying on weak or unsubstantiated justifications may not only lead to the rejection of the extension but can also expose the taxpayer to stricter scrutiny or even the refusal of future submissions.

Legal Consequences of Non-Compliance:

Failure to submit a review request within the deadline—without a valid extension—can result in serious legal consequences. These may include penalties under the Tax Procedures Law, which can range from fixed fines to daily accumulations. In more severe cases, the FTA may enforce asset seizures, including freezing bank accounts or seizing property. Non-compliance could also lead to restrictions on business licensing or the inability to renew licenses. If the issue is not resolved, the case may escalate to court or tax disputes resolution committees. These enforcement actions can have a significant impact on a business's continuity, cash flow, and credit reputation.

Impact on Creditworthiness and Licensing:

Delays in tax compliance can have far-reaching consequences beyond just legal issues; they can severely affect commercial relationships. A record of tax defaults may damage banking and credit relationships, which can have a lasting impact on access to financing. Investor confidence may also decrease, making it more difficult to attract future investment. Furthermore, businesses may face complications in obtaining or renewing business licenses, and this can lead to challenges in securing government tenders. Continuous delays can even result in increased regulatory oversight, such as audits or inspections. It is essential to maintain timely tax filings and communicate transparently with the FTA to safeguard both your legal standing and financial position.

Enforcement Actions and FTA Authority:

Once the 40-day period lapses without a valid extension, the FTA has the full authority to impose various enforcement actions. These can include administrative penalties, the freezing of bank accounts, and the attachment of assets. In more serious cases, the FTA may refer the matter to judicial authorities for further action. These enforcement actions are in accordance with Articles 24–29 of the Federal Tax Procedures Law, and they may proceed without any additional warnings. Non-compliance can lead to significant legal and financial repercussions, making it crucial to meet all deadlines and maintain proper documentation.

Taxpayer Rights and Legal Recourse:

Taxpayers retain the right to appeal FTA decisions through the Tax Disputes Resolution Committee (TDRC). Additionally, under Federal Decree-Law No. 28 of 2022, judicial review can be sought through administrative courts in cases involving procedural errors, denial of extension requests, or disputed penalties.

Extension applicants are advised to consult legal or tax advisors before filing and include a full record of evidence to support their case.

Conclusion:

Ministerial Decision No. 1 of 2025 marks a positive shift in the UAE’s tax regime, providing legal flexibility for businesses facing unavoidable compliance challenges. However, this relief is conditional and requires robust justification supported by credible documentation. Taxpayers must remain diligent in reviewing tax notices, adhering to procedural timelines, and acting promptly in exceptional situations. By doing so, they can ensure their rights are protected while maintaining compliance with the evolving tax framework of the UAE.