Court actions

Competent courts

Which courts have jurisdiction to hear tax disputes?

Distinct committees were set up to act as the first level of review of government tax-related disputes. Cabinet Decision 23/2018 on Forming the Tax Disputes Settlement Committees, their Work Systems and Procedures was promulgated on 1 May 2018. The tax dispute resolution committees came into operation in March 2019 and are administered by the Ministry of Justice, but located at the competent courts of their respective emirate.

There are three tax dispute resolution committees in the United Arab Emirates: 

  • one in Abu Dhabi, dedicated to taxpayers with a registered address in Abu Dhabi; 
  • one in Dubai, dedicated to taxpayers with a registered address in Dubai; and 
  • one in Sharjah, dedicated to taxpayers with a registered address in one of the other five emirates – namely, Ajman, Fujairah, Sharjah, Ras Al Khaimah and Fujairah.

 

Minister of Justice Decisions 237/2019 and 238/2019 established tax disputes circuits in the Federal Primary Court and the Federal Court of Appeals to hear challenges against a ruling by any of the tax dispute resolution committees at the federal court level. The Federal Supreme Court is the last level of appeal where a litigant chooses to appeal a judgment by the Tax Disputes Circuit of the Federal Appeals Court.

The execution judge of the Federal Courts is responsible for executing enforcement decisions by the Director General of the Federal Tax Authority, rulings by a tax dispute resolution committee or judgments by the federal courts, as the case may be.

The Federal Public Prosecution is responsible for the administration of tax evasion crimes and the federal criminal courts are the competent courts to adjudicate tax evasion crimes.

Lodging a claim

How can tax disputes be brought before the courts?

Any person may submit an application to the Federal Tax Authority to reconsider any of its decisions issued in connection to him or her, in whole or in part, within 20 working days of the aggrieved person being notified of the decision. The Federal Tax Authority must decide on the application within 20 working days and communicate the decision to the applicant within five working days.

Subsequently, if the aggrieved person wishes to contest the Federal Tax Authority’s decision on the reconsideration application, the next step would be to submit an objection against the Federal Tax Authority’s decision to the Tax Dispute Resolution Committee of Abu Dhabi, Dubai or Sharjah, depending on the registered tax address of the objector.

For the Tax Dispute Resolution Committee to accept the objection, the aggrieved person must have perfected the reconsideration application procedures vis-à-vis the Federal Tax Authority and have settled all taxes and penalties subject of the objection.

The law requires the Tax Dispute Resolution Committee to issue its decision within 20 working days, which may be extended by a further 20 working days in cases where the Tax Dispute Resolution Committee has reasonable grounds to extend. The decision must be communicated to the objector within five working days of its being issued.

The Tax Dispute Resolution Committee’s ruling is deemed final and a writ of execution (directly enforceable) is issued if the amount in dispute is less than 100,000 dirhams. If the amount in dispute is more than 100,000 dirhams the ruling may be challenged before the federal courts.

The first level of challenge is before the Tax Disputes Circuit of the Federal Primary Court.

A judgment of the Federal Primary Court can be appealed to the Tax Disputes Circuit of the Federal Appeals Court.

Lastly, a judgment of the Federal Appeals Court can be appealed to the Federal Supreme Court.

In the case of an execution order against the taxpayer, an appeal or grievance can be filed to challenge the execution.

Combination of claims

Can tax claims affecting multiple tax returns or taxpayers be brought together?

Any person may submit a reconsideration application to the Federal Tax Authority to reconsider any of its decisions issued in connection to the person, in whole or in part.

Decisions by the Federal Tax Authority may be in respect of one tax return or several. Such cases have occurred before the tax dispute resolution committees.

Moreover, taxpayers are sometimes registered under one tax registration as a group whereby the main registrant is the entity that corresponds with the Federal Tax Authority, submits reconsideration applications, and is the objecting party and litigant on behalf of itself or the other taxpayers registered under its profile with the Federal Tax Authority in a tax dispute.

Pre-claim payments

Must the taxpayer pay the amounts in dispute into court before bringing a claim?

Payment of the taxes and penalties in dispute is an explicit request under the law, otherwise known as the ‘pay now, argue later’ rule. For an objection to be accepted by a tax dispute resolution committee, and subsequently by the federal courts, the taxpayer must settle all taxes and penalties due. If the taxpayer does not do so, the competent tax dispute resolution committee overseeing the objection and the federal courts will reject the objections and lawsuits on a procedural basis.

Cost recovery

To what extent can the costs of a dispute be recovered?

The Tax Dispute Resolution Committee and the federal courts may order the expenses of the lawsuit to be imposed on the losing party, either the taxpayer or the Federal Tax Authority. The expenses include the attorneys’ fees. However, attorneys’ fees ordered by the federal courts usually amount to between 500 and 3,000 dirhams, irrespective of the actual attorneys’ fees incurred by the litigant.

Third-party funding

Are there any restrictions on or rules relating to third-party funding or insurance for the costs of a tax dispute, including bringing a tax claim to court?

With the exception of the Dubai International Financial Centre and Abu Dhabi Global Market Courts, third-party funding is not regulated in the United Arab Emirates; consequently, third-party funding for tax disputes is not explicitly prohibited by UAE law.

However, tax evasion liability may be a risk for a third-party funder. If the taxpayer is convicted of tax evasion, the third-party funder may be found to be an accomplice to the tax evasion crime.

There is also no prohibition on insurance for the costs of a tax dispute.

Court decision maker

Who is the decision maker in the court? Is a jury trial available to hear tax disputes?

The tax dispute resolution committees are administrative committees with the authority to issue judicial decisions. They are physically located in the courts of their respective emirate, but are administered by the Ministry of Justice. Each committee is adjudicated over by a panel of three members: a judge who chairs the committee and two tax experts.

The Tax Disputes Circuits of the Federal Primary and Appeals Courts are constituted of a panel of three judges each.

The Federal Supreme Court, the last tier of appeal, is constituted of a panel of five judges, one of whom is the chief justice of the Federal Supreme Court, who chairs the panel.

Time frames

What are the usual time frames for tax trials?

The Tax Dispute Resolution Committee has a limit of 20 working days to issue its ruling, but may extend the period to an additional 20 working days. Once the ruling is issued, the Tax Dispute Resolution Committee must inform the taxpayer of its decision within five working days.

The Tax Dispute Resolution Committee communicates with the taxpayer via the email address that is submitted by the taxpayer when lodging the objection. The Regulations to the Civil Procedures Law mandate that notifications by email are deemed perfected upon being sent, not when received by the addressee. This is important, as the objector should be diligent in ensuring that the email address used in the objection is continuously monitored for any communication from the Tax Dispute Resolution Committee.

Once notified of the Tax Dispute Resolution Committee’s ruling, the taxpayer has 20 working days to challenge the ruling before the Federal Primary Court.

The taxpayer then has 30 days from the date of issuance of the Federal Primary Court judgment to appeal it before the Federal Appeals Court.

Finally, the taxpayer then has 60 days from the date the issuance of the Federal Appeals Court judgment to appeal before the Federal Supreme Court.

The time frames for the respective courts to adjudicate a case are variable and depend on the complexity of the case. A taxpayer would usually expect two to six months on average for the Federal Primary Court, two to four months on average for the Federal Appeals Court, and one to three months on average for the Federal Supreme Court.

Disclosure requirements

What are the requirements concerning disclosure or a duty to present information for trial?

There is no formal disclosure requirement. The taxpayer and the Federal Tax Authority are not obliged to submit to the Tax Dispute Resolution Committee and federal courts all documents that either support or are detrimental to their case. There are also no discovery processes either.

Permitted evidence

What evidence is permitted in a tax trial?

In civil tax disputes, the litigants may submit documentary evidence and official statements. The litigants may also provide testimony. There is, generally, no cross-examination in civil disputes. However, if the tax trial is a criminal trial, persons may be subpoenaed to appear for cross-examination.

At the Tax Dispute Resolution Committee level, there are usually minimal hearings and generally no appointment of experts takes place (as the committee is constituted of a judge and two tax experts).

Before the federal courts, the litigants (or the judge of his or her own accord) may request the appointment of an expert to investigate a matter. The expert may not necessarily be a tax expert, and his or her assignment may not necessarily be a tax-related assignment. For example, the court may appoint a technology or corporate expert. Court-appointed experts usually have wide powers, such as to question related persons, investigate the premises of the litigants and any government authorities, or to investigate any hard copy or digital documents related to the case, and so forth.

All documents presented to the Tax Dispute Resolution Committee and the federal courts must be in Arabic or translated into Arabic.

Permitted representation

Who can represent taxpayers in a tax trial? Who represents the tax authority?

A taxpayer may represent themselves before the Tax Dispute Resolution Committee and the federal courts. Otherwise, an authorised representative may appear before the Tax Dispute Resolution Committee on behalf of the taxpayer, whereas before the federal courts, the taxpayer must be represented by a lawyer with rights of audience before the federal courts.

Legal aid may be provided for defendants in tax criminal cases. There are also legal aid services provided by the Abu Dhabi Justice Department, but not particularly aimed at tax disputes.

The Federal Tax Authority is represented by the Department of State Disputes of the Ministry of Justice.

Publicity of proceedings

Are tax trial proceedings public?

With certain exceptions, the hearings themselves can generally be attended by the public. The tax dispute resolution committees and lower federal courts’ rulings and judgments are so far undisclosed. Most of the judgments of the Federal Supreme Court are disclosed online. The government is increasing its efforts to make more federal court judgments available on public websites.

Burden of proof

Who has the burden of proof in a tax trial?

The burden of proving the accuracy of a tax return falls upon the taxpayer, and the burden of proving cases of tax evasion falls upon the Federal Tax Authority. 

Case management process

Describe the case management process for a tax trial.

Objections submitted to a tax dispute resolution committee are done via an official form and submitted to the Ministry of Justice. A memorandum can be appended to the form. Subsequently, the Ministry of Justice must communicate the objection to the competent tax dispute resolution committee (Abu Dhabi, Dubai or Sharjah) within two working days.

A tax dispute resolution committee may, of its own accord or upon the request of the objector, allow the holding of sessions in the presence of the taxpayer and his or her legal representative or tax agent.

The ruling of a tax dispute resolution committee is communicated to the taxpayer via the email address provided by the taxpayer at the time of registering the objection.

At the federal courts level, the challenge is filed by the plaintiff submitting his or her statement of claim to the case management office. After filing, the date for appearance of the defendant before the case management office or the court is 10 days from the date of filing.

Appeal

Can a court decision be appealed? If so, on what basis?

A ruling of a tax dispute resolution committee can be challenged before the Tax Disputes Circuit of the Federal Primary Court.

A judgment of the Federal Primary Court can be appealed to the Tax Disputes Circuit of the Federal Appeals Court.

A judgment of the Federal Appeals Court can be appealed to the Federal Supreme Court.