FTA Decision No. 2 of 2025: Updated Policy on Issuance of Clarifications and Directives (Effective from 1 March 2025)
The Federal Tax Authority (FTA) has issued Decision No. 2 of 2025, introducing an updated and consolidated Policy on Issuance of Clarifications and Directives, effective from 1 March 2025. This Decision outlines in detail how taxpayers can seek formal clarifications on tax matters, how the FTA will handle such requests, and the procedures for issuing directives, including administrative exceptions, input tax apportionment methods, and advance pricing agreements.
Key Highlights of FTA Decision No. 2 of 2025:
1. Clarifications Framework
- Private Clarifications:
- – Official responses to specific tax questions submitted by taxpayers, subject to a formal application and prescribed fees.
- – To request a private clarification, the taxpayer (or authorized agent) must submit a request via the FTA portal, providing all necessary information and supporting documents.
- – Clarifications are binding on the Authority and applicable only to the requesting party, unless otherwise stated.
- – FTA may reject a request for reasons such as hypothetical scenarios, existing clarifications, ongoing tax audits, or potential tax avoidance.
- Public Clarifications & Guides:
- – Public clarifications, guides, and e-learning programs may be issued for broader applicability.
- – These are shared with the Ministry of Finance for review before publication.
2. Administrative Exceptions
- FTA may grant administrative exceptions related to VAT and Excise Tax in specific cases (e.g., tax invoice formats, proof of export, tax credit notes).
- Exceptions are granted when justified and aligned with legal provisions and are valid typically for three years, subject to earlier legislative changes.
- Requests require detailed information and supporting documents, reviewed based on set timelines.
3. Input Tax Apportionment Decisions
- Taxpayers may request to use alternative input tax apportionment methods where standard methods do not yield fair outcomes.
- Alternative methods are subject to prior approval and must be substantiated by business-specific circumstances.
- Once approved, the alternative method typically applies for two to four years.
- FTA reserves the right to review and reassess based on compliance and accuracy of the submitted data.
4. Advance Pricing Agreements (APAs)
- Introduces the framework for Advance Pricing Agreements (APAs) under UAE Corporate Tax Law.
- Applications for unilateral APAs will be accepted starting Q4 of 2025, with guidance on bilateral/multilateral APAs to follow.
5. Minimum Information Required for Clarification Requests
- Name, address, and Tax Registration Number.
- Details of the tax agent or legal representative (if applicable).
- Estimated tax/penalty impact.
- Subject and description of the issue.
- Relevant tax legislation references.
- Supporting documents/contracts.
- Authorized signatory details and formal declarations.
6. FTA’s Administrative Processes and Timeframes
- Clear timelines established for handling clarification and exception requests.
- If additional information is required, taxpayers must respond within 40 business days.
- Requests not completed within 40 business days will be automatically closed by the FTA system.
- FTA may set extended timeframes depending on complexity and will notify applicants accordingly.
7. Impact on Taxpayers
- Ensures greater transparency, consistency, and procedural clarity for businesses seeking certainty on tax positions.
- Provides a well-defined pathway to request official clarifications and administrative relief, enhancing compliance and mitigating risks.
Conclusion:
The FTA Decision No. 2 of 2025 marks a significant step in streamlining the communication between taxpayers and the Authority, facilitating compliant business practices in the UAE. Businesses should familiarize themselves with these new protocols to effectively address any uncertainties in their tax obligations.
For expert assistance with tax clarifications, VAT, Excise, Corporate Tax planning, and Advance Pricing Agreements, KGRN Chartered Accountants stands ready to support your business needs with in-depth knowledge and practical solutions.
