The Federal Tax Authority (FTA) has announced that businesses must complete Corporate Tax registration within 90 days from the Date of Incorporation / MOA.
Businesses operating in the UAE must comply with corporate tax regulations to avoid fines and penalties. Enterprises must register for corporate tax and make timely payments to stay in line with the law and prevent any potential penalties or fines. Therefore, it is essential to take prompt action and ensure compliance with the tax requirements as soon as possible.
UAE Corporate Tax Penalties
The UAE’s Corporate Tax regime applies to financial years starting on or after 1 June 2023, so businesses become subject to the regime from the start of the first financial year that begins on or after that date. Not complying with the Corporate Tax regulations set by the Federal Tax Authorities and the Ministry of Finance could lead to fines and penalties. To address this, the UAE issued Cabinet Decision No. (75) of 2023, which outlines administrative penalties for violations of Federal Decree-Law No. (47) of 2022 concerning the taxation of corporations and businesses.
The Cabinet Decision No. (75) of 2023 is a vital part of the UAE's efforts to enforce penalties for violations of Federal Decree-Law No. (47) of 2022. This decision gains even more importance as the UAE gets closer to implementing corporate tax, aiming to promote tax compliance among businesses and organizations.
Starting from August 1, 2023, the Official Gazette will publish this decision, and it will come into effect. From this date onward, those who break the Corporate Tax Law will be subject to the specified Administrative Penalties mentioned in the table.
Violations and the corresponding administrative penalties related to the application of Federal Decree-Law No. (47) of 2022 on the taxation of businesses and companies.
| Violation | Penalty Amount in AED |
|---|---|
| Not keeping required records under tax laws is a violation. | One of these shall apply -
|
| Not submitting tax-related data, records, and documents in Arabic to the Authority when requested. | 5,000 |
| Not submitting a deregistration application within the specified timeframe in the Corporate Tax Law and its implementing decisions is a violation. | Late submission incurs a 1,000 penalty, increasing by 1,000 monthly, up to a maximum of 10,000. |
| Not informing the Authority of any case requiring an amendment to the Tax record. | One of these shall apply -
|
| If the Legal Representative fails to provide timely notification of their appointment, they will be personally liable for the penalties. | 1,000 |
| Legal Representative's late Tax Return filing incurs penalties from their own funds. |
|
| Late Tax Return Submission. |
|
| Failure to settle the Payable Tax |
|
| Incorrect Tax Return submission. | 500, unless the Person corrects the Tax Return before the submission deadline as per Corporate Tax Law. |
| Submitting a Voluntary Disclosure for errors in Tax Return, Tax Assessment, or Tax Refund Application under Article (10) of the Tax Procedures Law. | 1% per month (or part thereof) on the Tax Difference from the due date of the Tax Return, Tax refund application, or Tax Assessment notification until the Voluntary Disclosure submission date. |
| Not submitting a Voluntary Disclosure for errors in Tax Return, Tax Assessment, or Tax Refund application under Article (10) of the Tax Procedures Law before being notified of a Tax Audit is a violation. |
|
| Not facilitating the Tax Auditor during a Tax Audit. | 20,000 |
| Late submission of a Declaration to the Authority. |
|
From August 1, 2023, businesses, tax persons, and Freezone Persons in the UAE will face enforcement of administrative fines and penalties for corporate tax violations.
UAE Corporate Tax Fines For Late Registration
Every business must register for Corporate Tax and obtain a Registration number. During the registration process, it is essential to submit all the required documents correctly. Failure to register or delaying the registration for Corporate Tax can result in significant fines.
UAE Corporate Tax Penalties For Late Return Filing
Late submission of Corporate Tax returns can lead to substantial penalties. For instance, if a business's fiscal year ends in April, and the tax return filing deadline is on March 15th, not complying with federal decree laws or filing taxes after the due date can result in significant fines in Dirhams.
UAE Corporate Tax Late Payment Penalty
In the UAE, late payment penalties for corporate tax are calculated using a common formula. Initially, a fixed penalty, usually a percentage of the outstanding tax amount, is applied for the first month of delay. For each subsequent month of delay, an additional fixed penalty is added. Moreover, interest is imposed on the overdue tax amount, starting from the due date until the full tax amount is paid.
Paying corporate taxes on time is crucial for companies to avoid penalties and fines imposed by the authorities. Timely tax payments demonstrate compliance and responsibility, enhancing the company's reputation and trustworthiness among stakeholders. Additionally, on-time tax payments ensure smooth business operations and avoid potential legal issues, allowing companies to focus on growth and development.
Corporate Tax Services in Dubai
Making timely tax payments in line with the Ministry of Finance regulations is crucial to avoid fines or penalties. At Reyson Badger, we are dedicated to providing corporate tax services in Dubai, UAE. Our expertise helps clients stay compliant with tax laws and remain informed about any corporate tax developments. Get in touch with Reyson Badger, a leading accounting and auditing firm in the UAE, to know more.
