Client Background

Our client is a mid-sized general trading company based in Dubai, established in 2017, with annual revenues of approximately AED 12 million. The company deals primarily in electronics and consumer goods, importing from Asia and distributing across the UAE and GCC markets. They had been VAT-registered since January 2018 and employed a freelance accountant to handle their tax filings.

The Challenge

In March 2023, the company received a tax assessment notice from the Federal Tax Authority (FTA) totaling AED 180,000 in penalties. The breakdown included:

• AED 65,000 in late filing penalties across 6 VAT return periods (2021–2022)
• AED 48,000 in penalties for incorrect input tax recovery on non-eligible expenses
• AED 42,000 in administrative penalties for failure to maintain proper tax records
• AED 25,000 in penalties for inaccurate tax return information

The company's previous accountant had filed returns late on multiple occasions, claimed input tax on entertainment and personal vehicle expenses, and failed to maintain the required documentation for several transactions. The company was facing a significant financial burden and potential disruption to their operations.

Our Approach

Al Mobaderoon was engaged in April 2023, just 15 days before the reconsideration deadline. Our team took immediate action:

Phase 1: Comprehensive Review (Days 1–5)

We conducted a thorough review of all VAT returns filed between 2021 and 2022, cross-referencing them with the company's accounting records, bank statements, and purchase invoices. We identified that 4 out of 6 late filings were due to the accountant's negligence rather than the company's intent, with email evidence showing the company had provided all documents on time.

Phase 2: Evidence Compilation (Days 5–10)

We compiled a comprehensive evidence package including timestamped communications between the company and their previous accountant, corrected VAT calculations, proper categorization of input tax claims, and reconstructed records for transactions that lacked documentation. We also obtained a statement from the previous accountant acknowledging the filing delays.

Phase 3: Reconsideration Submission (Days 10–14)

We prepared a detailed reconsideration request citing relevant FTA guidelines and Cabinet Decision provisions, clearly demonstrating which penalties resulted from third-party errors versus genuine oversights. Our submission included voluntary disclosures for the periods with incorrect input tax claims, showing the company's good faith and willingness to comply.

Results & Impact

After a 45-day review period, the FTA issued their decision in June 2023:

• 75% reduction in total penalties — from AED 180,000 to AED 45,000
• Late filing penalties reduced to AED 20,000 (4 periods waived entirely)
• Administrative penalties fully waived based on corrected record-keeping
• Input tax penalties reduced to AED 25,000 with voluntary disclosure credit applied

The company saved AED 135,000 in penalties. Additionally, Al Mobaderoon restructured their bookkeeping processes and implemented a VAT compliance calendar to prevent future issues. The company has maintained a clean compliance record since our engagement.