The UAE’s new corporate tax system, implemented in 2023, levies a 9% tax on revenues above AED 375,000, with penalties for noncompliance defined in Cabinet Decision No. 75 of 2023. Fines for late filing, unpaid taxes, mistakes in records, and refusal to cooperate during audits are all possible penalties.
Penalties Under Corporate Tax UAE
Penalties for late corporate tax registration.
A taxable person who fails to keep adequate records as required by corporate tax legislation faces an AED 10,000 penalty. If the second crime happens within 24 months of the first, the punishment rises to AED 20,000.
Administrative fines and penalties.
Failure to maintain records and provide information:
- The penalty for violating the record-keeping requirements is 10,000 AED each violation.
- If the infringement is committed again within 24 months, the penalty increases to AED 20,000.
- For the first twelve months, late submission of the Declaration to the Authority incurs an AED 500 monthly penalty. Following this period, the penalty rises to AED 1,000 per month or part thereof. To avoid these fines, firms must ensure that they submit Declarations on time.
Document Submission in Arabic: If relevant paperwork is not produced in Arabic upon request, an amount of AED 5,000 will be deducted.
Application for deregistration: Penalties apply if a deregistration application is not submitted within the time frame specified.
- Late company tax filing penalties vary between 1,000 and 10,000 AED.
- Modifying tax records requires notification to the Authority and incurs an AED 1,000 penalty.
- Repeat offenses will result in an AED 5,000 penalty within 24 months.
Notifying Legal Representatives and Filing Tax Return
Penalties for attorneys/legal representatives: Legal agents who fail to notify appointments or complete tax filings on time may face penalties.
- The starting fine is set at AED 500 for the first twelve months.
- After thirteen months, the penalty increases to 1,000 AED.
Resolving Accountable Tax: Unpaid company taxes incur a monthly 14% yearly penalty from the day after the due date. Every month, this punishment is imposed on the same day. For voluntary disclosures, the penalty begins 20 business days following filing. Tax assessments commence 20 business days following notice.
Penalties for breaking Corporate Tax Law
Listed below are penalties for breaking the UAE Corporate Tax Law (Federal Decree-Law No. 47 of 2022) and its modifications, Cabinet Decision No. 10 of 2024. Cabinet Decision No. 75 of 2023 imposes sanctions for violations of the Corporate Tax Law and the Tax Procedures Law.
- Businesses who fail to retain records and relevant information in accordance with the Corporate Tax and Tax Procedures Law may face a penalty/fine of AED 10,000 for each violation and 20,000 AED for subsequent violations within 24 months. Each violation costs AED 10,000, and several infractions cost more than 20,000 AED within 24 months.
- Not delivering information, records, and papers in Arabic as required by the Authority. Fine: AED 5,000
- Failure to file the deregistration application by the deadline results in a fine of AED1,000 each month, up to AED10,000.
- Failure to notify the Authority of any instance necessitating amending tax records: fine of AED1,000 for each infringement. More than AED 5,000 for repeated offenses over 24 months.
- The Legal Representative failed to declare their appointment: AED 1,000 (from the Personal Funds of the Legal Representative)
- The Legal Representative’s failure to timely file a tax return: 500 AED per month for the first 12 months and AED 1,000 monthly after the first year (from the Legal Representative’s funds)
- Failure to submit an income tax return on time: AED 500 for the first 12 months and AED 1,000 every month after the 13th month.
- Not paying the required taxes: A 14% yearly monthly penalty on the outstanding amount of due taxes begins the day after the payment deadline.
- Filing an erroneous tax return: AED 500, if not changed by the deadline.
- Filing a voluntary disclosure of inaccuracies in a tax return, tax assessment, or refund application: A 1% monthly penalty on the tax discrepancy, commencing the day following the appropriate tax return, refund application, or tax assessment deadline.
- Failure to provide a voluntary disclosure on an audit:
- A 15% fixed penalty for any discrepancy in tax payable.
- A monthly penalty of 1% of the tax differential, applied as follows:
- If a voluntary disclosure is made after being notified of a tax audit, the penalty is calculated from the initial due date of the tax return, refund request, or tax assessment notice until the disclosure is filed.
- If no voluntary disclosure is made, the penalty is calculated from the due date until the tax assessment is issued.
- Not giving the Tax Auditor with facilitation fine: AED 20,000 (from the money of the Person, Legal Representative, or Tax Agent, as applicable)
- Not filing or submitting a declaration fine AED 500 following the deadline for each of the first twelve months. AED 1,000 every month beginning with the thirteenth month.
- Failure to submit the corporation tax registration application by the deadline results in an AED 10,000 penalty.
Conclusion
Businesses can make voluntary disclosures to fix inaccuracies, but fines may still apply for late repairs. Key compliance measures include maintaining correct records, filing on schedule, and remaining up to speed on tax rules. Consulting with tax consultants and employing accounting software may help firms manage these new regulations successfully, reducing risks and maintaining compliance in the UAE’s changing tax landscape.