When a UAE tax regulation goes beyond the law: how a taxpayer can challenge subordinate legislation

In tax practice, taxpayers may face situations where they consider to challenge a Ministerial Decision, an FTA decision, or another subordinate instrument when the substantive concern is not the tax assessment itself, but because of the legal rule underlying it.

The immediate answer is often expressed in overly broad terms. It is sometimes said that the taxpayer may simply “challenge the regulation,” or, at the opposite extreme, that only the Federal Supreme Court may address such a matter. Neither formulation is entirely accurate. The UAE framework is more nuanced. It permits review of subordinate legislation, but generally in the context of a specific dispute where the instrument has already been applied, rather than by way of a standalone abstract application brought by the taxpayer directly before the Federal Supreme Court.

Constitutional limits on delegated legislation

1. The constitutional starting point is Article 60(5) of the UAE Constitution. It authorizes the Council of Ministers to “issue such regulations as may be necessary for executing the federal laws insomuch as such regulations do not amend, put on hold, or except certain persons from the execution of these laws… A competent federal minister or any other administrative authority may be assigned, by special provision of the Law or by the Council of Ministers, to issue some of these regulations”. 

This rule is the core constitutional limit on subordinate legislation. In the tax field, where so much turns on executive detail, Article 60(5) matters because it confirms that implementation is one thing and amendment is another. An executive instrument may organize the application of a tax law. It may not rewrite the legislative rule. 

2. That proposition also sits comfortably with the broader constitutional hierarchy. Article 101 provides that if the Federal Supreme Court, when deciding on the constitutionality of a law, legislation, or regulation, finds that local legislation or a regulation contains provisions contrary to the Federal Constitution or a federal law, the competent authority must immediately remove or correct the violation. Article 151 states the hierarchy even more starkly: “In case of conflict, that part of the inferior legislation which is in conflict with the superior legislation shall be rendered null and void to the extent that removes the conflict. In case of a dispute, the matter shall be referred to the Federal Supreme Court for deciding thereon”. 

Read together, these provisions confirm that subordinate norms are not immune from judicial control simply because they are labelled “implementing decisions” or declare that they are issued in compliance with the superior legislation. 

Judicial hierarchy and the role of the lower courts

3. The institutional framework is split between the Constitution, the general law on the federal judiciary, and a separate law specifically governing the Federal Supreme Court. Federal Decree-Law No. 32 of 2022 on the Federal Judicial Authority lays down the general structure of the federal judiciary, while Federal Decree-Law No. 33 of 2022 Concerning the Supreme Federal Court separately regulates the Supreme Court itself. 

Article 1 of the Judicial Authority Law provides that “judges are independent, and, in performing their duties, they shall be subject to no authority other than the provisions of the Constitution, the applicable laws and their consciences”. That point is not merely institutional. It strengthens the argument that a lower court is not bound to give effect to executive legislation that exceeds the limits set by superior law. 

Initiation

4. The important procedural question is how control over subordinate legislation is activated. 

Article 99(3) of the Constitution provides that the Federal Supreme Court shall “consider the constitutionality of Laws, Legislations and Regulations in general if it is so requested by any court in the country while hearing a relevant claim. The concerned court shall comply with the resolution of the Federal Supreme Court rendered in this respect”. The separate statutory basis for that jurisdiction appears in Article 4(4) of the Supreme Federal Court Law, which gives the Court jurisdiction over the constitutionality of laws, legislations, and regulations “in general” where the issue is referred by any court in the Federation or the member Emirates “during viewing an action before a such court”. 

These rules do not say that any interested person may directly petition the Federal Supreme Court whenever he considers a regulation unlawful. It says that the matter reaches the Federal Supreme Court if a court requests it while hearing a case. The constitutional model is therefore one of judicial referral, not direct taxpayer access in the abstract. The taxpayer may raise the plea, develop it, and ask the court seized of the merits to refer the issue, but the constitutional request itself is made by the hearing court. 

5. At the same time, referral to the Federal Supreme Court should not be understood as the only way in which a conflict between primary and subordinate legislation may be dealt with. In our view, where a lower court concludes that subordinate legislation exceeds the limits of delegated authority or conflicts with the parent law, it has a strong basis to resolve the dispute before it by applying the superior legislative norm. Referral becomes relevant where the court considers that the case requires a formal constitutional determination on the validity or permissible scope of the subordinate legislation. 
6. This also answers a common procedural misconception. A taxpayer who believes that a Ministerial Decision or Cabinet Decision exceeds the parent law does not normally bypass the ordinary litigation path and seize the Federal Supreme Court directly. Instead:

• The taxpayer raises the point in the dispute in which the regulation matters. 
• If the lower court considers that a genuine constitutional or hierarchy-of-norms issue arises, it may refer that question under Article 99(3) of the Constitution and Article 4(4) of the Supreme Federal Court Law. 

7. The Constitution does not confine that referral power to first instance. It speaks of any court in the country. Article 4(4) of Decree-Law No. 33 of 2022 uses equally broad wording. On the face of the text, that language is broad enough to include both the court of first instance and the appellate court. 
8. At the same time, this does not mean that a lower court is free to apply an executive regulation that contradicts the parent law. The strongest basis for preferring the superior norm lies in the combined effect of the Constitution and the Federal Judicial Authority Law:

• Article 1 of Federal Decree-Law No. 32 provides that judges, in performing their duties, are subject to no authority other than the provisions of the Constitution, the applicable laws, and their consciences. 
• That principle must be read together with Article 60(5) of the Constitution, which denies the executive power to amend, suspend, or create exceptions from federal laws by regulation, and Article 151, which renders conflicting inferior legislation void to the extent of the conflict. 

On that basis, where a Cabinet Decision, Ministerial Decision, FTA Decision or Directive or other subordinate instrument is inconsistent with the parent federal law, the court has a solid constitutional basis to:

1. refuse to let the delegated rule prevail in the case before it, and 
2. decide the dispute in accordance with the superior legislative norm. 

If the court considers that a formal constitutional determination is required, Article 99(3) of the Constitution and Article 4(4) of the Supreme Federal Court Law supply the referral route to the Federal Supreme Court. 

Requirement for an implementing act

9. Article 4(8) of Federal Supreme Court Law is also useful for drawing the line between constitutional referral and cassation. It confirms the Court’s cassation jurisdiction over judgments issued by the federal courts of appeal in accordance with the regulating laws. This matters because the Federal Supreme Court is not involved only as a constitutional court. It is also the cassation court for federal appellate judgments. The two functions should not be conflated:

• a referral under Article 4(4) concerns the constitutionality of laws, legislations, and regulations during the hearing of a pending case;
• a cassation appeal under Article 4(8) is a challenge to an appellate judgment under the ordinary rules governing cassation. 

10. The most useful published judicial statement on the direct challenge of regulatory decisions appears in Cassation No. 837 of 2019 (Administrative judgment dated 13 April 2020). There, the Court explained that an annulment action is directed against an administrative decision, whether individual or regulatory, and that the plaintiff must have a personal interest directly affected by it. 

The Court ruled that although a general regulatory decision may be contested, an individual decision issued in implementation of that regulatory decision must also be contested. If there is no such individual decision, the action is to be dismissed. The Court rejected the challenge because the appellant had sought annulment of Ministerial Decision No. 972 of 2017 on the Implementing Regulation of the Law Regulating the Legal Profession without contesting an individual decision implementing it. 

Tax disputes: procedural route to court

11. This case is not a tax case, but its logic is highly relevant to tax disputes. It tells that the UAE courts do not admit purely abstract attacks on regulatory texts where the claimant cannot point to an individualized implementing act that has altered his legal position. 

In tax, that implementing act will normally be easier to identify than in many other public-law contexts. Article 36(1) of the Tax Procedures Law specifies that “the Authority and the Person, as the case may be, may appeal the [Tax Dispute Resolution] Committee’s decision before the Competent Court”. Hence, a TDRC decision applying the contested executive rule to the taxpayer’s own facts is needed to crystallize the dispute and to challenge the error arising from the failure to apply the parent legislation because of the subordinate rule.  Once such an implementing act exists, the taxpayer’s interest is no longer theoretical. The regulation has moved from the abstract plane into the concrete sphere of enforceable tax consequences.

12. After Tax or Penalty assessment or another decision is issued, the next procedural barrier is not lack of standing but the statutory tax-dispute route under Tax Procedures Law. Once the subordinate rule has been embodied in an FTA decision, the taxpayer has a concrete grievance but must still respect the statutory channel through which UAE tax disputes reach court. The problem is then not lack of application, but prematurity if the taxpayer attempts to go to court before using the reconsideration and Committee stages required by the Tax Procedures Law.
13. In tax litigation, the most realistic strategy therefore looks less dramatic, but more effective, than the phrase “suing the regulation” suggests. 

The taxpayer should challenge the assessment or other individualized FTA act that has applied the executive rule to him. In doing so, he may argue that the underlying Cabinet Decision or Ministerial Decision exceeds the parent decree-law, conflicts with Article 60(5) of the UAE Constitution, or otherwise falls outside the permissible limits of delegated regulation. 

The hearing court may itself resolve the dispute by applying the superior legislative norm and declining to let the subordinate rule govern the case. Where the court considers that the matter requires a formal constitutional determination, it may refer the issue to the Federal Supreme Court under Article 99(3) of the Constitution and 4(4) of the Supreme Federal Court Law. 

That is the UAE mechanism in substance: 

• concrete litigation first, 
• resolution by the hearing court through application of the superior norm where appropriate; and 
• constitutional referral where the court considers it necessary.  

Disclaimer

Pursuant to the MoF’s press-release issued on 19 May 2023 “a number of posts circulating on social media and other platforms that are issued by private parties, contain inaccurate and unreliable interpretations and analyses of Corporate Tax”.

The Ministry issued a reminder that official sources of information on Federal Taxes in the UAE are the MoF and FTA only. Therefore, analyses that are not based on official publications by the MoF and FTA, or have not been commissioned by them, are unreliable and may contain misleading interpretations of the law. See the full press release here. 

The same reservation applies to the judicial, constitutional, and procedural issues addressed in this article. This study has not been commissioned, authorised, or endorsed by the Ministry of Justice, the Federal Supreme Court, or any other judicial authority in the UAE. It is not intended to convey, and should not be understood as conveying, any official position of those authorities. Nor does it purport to suggest that the interpretations, conclusions, or proposals set out in it are binding on the courts or must necessarily be adopted in judicial practice.You should factor this in when dealing with this article as well. It is not commissioned by the MoF or FTA. The interpretation, conclusions, proposals, surmises, guesswork, etc., it comprises have the status of the author’s opinion only. Furthermore, it is not legal or tax advice. Like any human job, it may contain inaccuracies and mistakes that I have tried my best to avoid. If you find any inaccuracies or errors, please let me know so that I can make corrections.