UAE corporate tax regulations were subject to fines and penalties for businesses that violated them. Enterprises have to be prepared to register for CT and make the required payments as soon as possible in order to avoid fines and penalties.
Penalties for UAE Corporate Tax
On June 1, 2023, the UAE implemented Corporate Tax, and businesses were geared up to deal with the effects of this change. If one did not follow the Federal Tax Authorities and the Ministry of Finance’s Corporate Tax regulations, there were fines and penalties that would apply.
In this regard, UAE has issued Cabinet Decision No. (75) of 2023 is essential in outlining administrative penalties for violations of Federal Decree-Law No. (47) of 2022 on the taxation of corporations and businesses.
A significant component of legislation that deals with the enforcement of administrative penalties for violations of the Federal Decree-Law No. (47) of 2022 is the Cabinet Decision No. (75) of 2023. This choice becomes even more crucial as the UAE edges closer to implementing a corporate tax in order to encourage tax compliance among organizations and businesses.
The Official Gazette will publish this decision, which will be effective from August 1, 2023. As of this date, violators of the Corporate Tax Law will be subject to the Administrative Penalties listed in the table.
Table of 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
| No. | Description of Violation | Administrative Fine Penalty Amount in AED |
|---|---|---|
| 1 | Failure to keep records and information up to date | AED 10,000 for each infraction, AED 20,000 for repeated offenses within 24 months of the last violation |
| 2 | Failure to provide tax-related information in Arabic | AED 5,000 |
| 3 | Late submission of deregistration application | AED 1,000 for late submission, up to AED 10,000 each month |
| 4 | Failure to alert the Authority of any situation necessitating a revision of Tax record information | AED 1,000 for each violation, AED 5,000 for repeated violations within 24 months of the previous violation |
| 5 | Legal Representative’s failure to send out appointment notifications | AED 1,000 |
| 6 | Non-filing of tax return by the legal representative | For the first 12 months, AED 500 for each full or partial month. Starting with the thirteenth month, AED 1,000 for each month or part thereof |
| 7 | Non-submission of tax return by the Registrant | AED 500 for each full or partial month throughout the first 12 months. AED 1,000 for each month or part of a month after the thirteenth month. Penalties begin the day after the deadline for filing a tax return and are assessed monthly after that |
| 8 | Failure to correct tax return before the Corporate Tax Law deadline for submission | AED 500, AED 1,000 if not corrected by the deadline |
| 9 | Voluntary Disclosure (errors in Tax Return, Assessment, or Refund) | From the due date until the voluntary disclosure, there is a 1% monthly penalty on the Tax Difference |
| 10 | Failure to submit Voluntary Disclosure (before Tax Audit) | The tax difference is fixed at 15%. From the deadline until the issuing of the voluntary disclosure or tax assessment, 1% of the monthly tax difference is required |
| 11 | Failure to offer facilitation to Tax Auditor | AED 20,000 |
| 12 | Late submission of Declaration | For the first 12 months, pay AED 500 every month. From the thirteenth month onward, pay AED 1,000 each month |
From August 1, 2023, the administrative fines and penalties for corporate tax in UAE come to be effective for businesses, tax persons and Freezone Persons.
CT Fines For Late Registration
Every business needs to register for Corporate Tax and obtain a Registration number. During the registration, the required documents for Corporate Tax must be properly submitted. However, not registering or delaying the registration of Corporate Tax would cause the imposition of a 10,000 Dirham.
Corporate Tax Penalties For Late Return Filing
Corporate Tax penalties for late return submission can be very high. In the case outlined, where a business’s fiscal year ends in April and the tax return filing due is on the 15th day of March, failing to abide by federal decree laws or filing tax returns after the deadline can result in substantial fines in Dirhams.
Penalty For Late Payment of Corporate Tax
In the UAE, the following formula is commonly used to determine the late payment penalty for corporate tax:
- For the first month of delay, a fixed penalty is applied, typically as a percentage of the outstanding tax amount.
- Each additional month of delay carries a further fixed penalty.
- Starting from the due date and continuing until the full amount of the tax is paid, interest is imposed on the amount of the overdue tax.
It is crucial for companies to pay their corporate taxes on time to avoid these fines and any potential penalties. To prevent financial hardships and keep a good reputation with the tax authorities, it is crucial to comply with tax laws and immediately pay tax responsibilities.
