Article 60 of the UAE Corporate Tax Law explains how corporate tax and penalties are assessed. With the Federal Tax Authority (FTA) frequently issuing new decree laws, businesses must stay updated to avoid corporate tax penalties and ensure timely registration and payments.
UAE Corporate Tax Penalties
The UAE introduced corporate tax on June 1, 2023, requiring companies to comply with new regulations. To ensure adherence, the Ministry of Finance and the Federal Tax Authority established strict rules. Violations of these laws now lead to administrative corporate tax penalties and fines.
The UAE published Cabinet Decision No. (75) of 2023, which specifies administrative penalties for violating Federal Decree-Law No. (47) of 2022 on business taxation, in order to resolve transgressions. As the UAE proceeds with implementing its corporation tax, this decision is essential to maintaining compliance.
With this decision coming into effect on August 1, 2023, and being published in the Official Gazette, any infractions of the Corporate Tax Law will result in the previously mentioned administrative fines. Companies must be conscious of these fines.
List of Corporate Tax Violations and Penalties
Violations and Administrative Penalties Annexed to Cabinet Decision No. (75) of 2023 on Violations Related to the Application of Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses:
- Penalties of 10,000 AED apply for each infraction if records and information required by the Tax Procedures Law or the Corporate Tax Law are not kept up to date, with a doubled penalty of 20,000 AED for repeated offenses committed within 24 months of the last violation.
- Failing to provide the Authority with tax-related information in Arabic records, documents, and data incurs a penalty of 5000 AED.
- Failing to alert the Authority of any situation necessitating a revision of Tax record information incurs a penalty of 1000 AED for each violation, with an increased penalty of 5000 AED for repeated violations within 24 months of the previous infraction.
- Under the Corporate Tax Law, a penalty of 1,000 AED is imposed for late submission of the deregistration application by the Registrant, with an additional penalty of no more than 10,000 AED for each subsequent month of delay.
- Penalties for not filing a tax return by the legal representative include 500 AED for each full or partial month during the first 12 months. From the thirteenth month onwards, the penalty increases to 1,000 AED for each month or part thereof.
- The Legal Representative will face a penalty of 1,000 AED if they fail to send out appointment notifications.
- Penalties for not submitting a tax return by the Registrant include 500 AED for each full or partial month during the initial 12 months. After the thirteenth month, the penalty increases to 1,000 AED for each month or part of a month. These penalties commence the day after the deadline for filing a tax return and are calculated monthly thereafter.
- If the individual does not correct their tax return before the Corporate Tax Law deadline for submission, they will be subject to a penalty of 500 AED initially and 1,000 AED for subsequent infractions.
- For Voluntary Disclosure of errors in a Tax Return, Assessment, or Refund, there is a 1% monthly penalty on the Tax Difference, calculated from the due date until the voluntary disclosure is made.
- Failure to submit a Voluntary Disclosure before a Tax Audit results in a fixed penalty of 15% of the tax difference. Additionally, from the deadline until the issuance of the voluntary disclosure or tax assessment, a 1% monthly penalty on the tax difference is imposed.
- Failure to offer facilitation to a Tax Auditor results in a penalty of 20,000 AED.
- For late submission of a Declaration, a penalty of 500 AED per month is imposed for the first 12 months. Afterward, starting from the thirteenth month, the penalty increases to 1,000 AED per month.
These corporate tax penalties apply to mainland, free zone, and taxable entities across the UAE.
Corporate Tax Fines and Penalties: Late Registration, Return Filing, and Payment
Every business in the UAE must register for corporate tax and obtain a tax registration number. Late or incorrect registration can result in corporate tax penalties.
Late submission of Corporate Tax returns can result in substantial penalties. For instance, if a business’s fiscal year ends in April and the tax return filing deadline is March 15th, failure to comply with federal decree laws or filing after the deadline can incur significant fines in Dirhams.
In the UAE, the late payment penalty for corporate tax is often calculated using the following formula:
– Initially, a fixed penalty, usually as a percentage of the outstanding tax amount, is applied for the first month of delay.
– Additional fixed penalties are imposed for each subsequent month of delay.
– Interest is levied on the overdue tax amount from the due date until the full payment is made.
It’s essential for companies to timely settle their corporate taxes to avoid these fines and potential penalties. Compliance with tax laws and promptly fulfilling tax obligations is crucial to maintain financial stability and a positive relationship with tax authorities.
Why Choose Unicorn Global Solutions
Unicorn Global Solutions offers quick and efficient corporate Tax Registration for businesses across Dubai. Text us on whatsApp or call us today to register for Corporate tax before the deadline passes to avoid penalties. We at UGS are a one stop solution to all tax related services with utmost quality services so that you could focus on other aspects of growing your business while we take care of your tax liabilities.
