The introduction of corporate tax UAE will ensure a transparent taxation process of corporate income tax UAE by meeting global standards. Not filing corporate tax returns will surely attract business tax penalties as per the current corporate tax regime. The proposed UAE corporate tax regime only talks about penalties and fines in general. However, there are not any specific details or calculated figures to identify. These details are included in the final legislation in 2023. Thus, we will talk about general aspects regarding the violation of tax laws and resulting penalties as per Resolution Number 49, 2021.
Penalties for failing to provide Accounting Records
Since the introduction of VAT taxation in the UAE, it has been necessary for enterprises to preserve accurate books of account and other documents for at least five consecutive years. If a company does not retain and prevail with the necessary tax documents and relevant data; it will be required to reimburse a fine of 10,000 dirhams for the initial violation and 20,000 dirhams for each subsequent breach of the regulations, as mentioned in Resolution no. 49 of 2021 for violation of tax laws in UAE.
When requested by the administration, a taxpayer must present accurate data on tax, documents, and records in Arabic or face a sanction of 20,000 AED.
Fines for delayed filing of Income Tax Returns
A VAT-registered person must pay a penalty of 1,000 dirhams for the 1st violation and 2,000 dirhams for the 2nd offence within twenty-four months if he fails to submit the tax returns by the deadline.
A taxable individual must pay the following fines if they don't make restitution with their taxes timely:
- If the Payable Tax is paid within 7 days of the deadline, two per cent (2%) of the unpaid tax is due; 4% of the unpaid tax is payable on the 1st day of next month or later; and 4% of the required tax cost is prone to a month-to-month sanction (up to a maximum of 300 %) if the tax is still owed more than 1 month after the due date.
Value Added Tax (VAT) Penalties for not Registering
Twenty thousand dirhams in fines will be imposed on any UAE-based VAT-eligible corporation that misses the deadline to enrol on the Federal Tax Authority site.
Failure of registrants to provide deregistration requisitions by the deadline will be accountable to a fine of one thousand dirhams and the amount can increase to ten thousand as the months pass by. Moreover, five thousand dirhams will be charged for the first offence, and fifteen thousand dirhams for subsequent failures to notify the Authority of a necessary adjustment to tax documents
What Penalties will be imposed when you submit false Income Tax Returns?
There will be two penalties when you submit false Income Tax Returns.
1. Fixed Sanction
- You have to pay a penalty of 1,000 dirhams for the 1st offence and 3,000 dirhams for subsequent violations if you decline to disclose inaccuracies in the tax returns you have filed voluntarily. Furthermore, taxpayers who voluntarily reveal fallacies but give false data will be subject to a penalty calculated as the difference between the amount paid and what had to be paid plus 5% of that difference.
2. Penalty based on a Percentage
- If the Registrants do not bring about a willing disclosure or if they commit so after being informed of the tax audit and the Authority has started up the tax audit operation, or after being requested for data contemplating the tax audit, whichever ensures early, the sanction is fifty percent (50%) of the amount revealed.
- If the Registrants choose to come forward after being informed of the impending tax audit but before the Authority starts it, the penalty will be 4 %.
- If the Registrants compel a volitional disclosure before the Authority notifies them of the tax audit; the penalty will be 5%.
A Tax Agent is chosen by the Company
A Tax Agent of a taxable firm must pay a penalty of 10,000 dirhams if they fail to notify the Federal Tax Authority (FTA) about their appointment promptly. He will be charged 1,000 AED for the 1st violation and 2,000 AED for a subsequent offence within twenty-four months if he neglects to catalogue a tax return on behalf of his taxable firm within the allotted deadline.
Choose the Tax Consultant Services in UAE
It's crucial to prepare yourself before jumping into the practical ground. You should take into account proficient corporate tax advisory services that help you avoid any possible penalty while encountering Corporate Tax UAE. Also, corporate tax advisors know the latest rules and regulations regarding corporate tax in UAE. Thus, it's a rational approach to avail that smart solution for the effective progress of your corporation.
So, reach out to our top-notch consulting firm to learn more about corporate tax law before the law is imposed with full effect.
Abrar Ahmad holds a Master’s as well as an MPhil in Finance and has an extensive experience of 10+ years in managing all aspects of Taxation, VAT Consulting and Accounting. He also carries with him a working knowledge of corporate tax and has helped drive value and growth to the businesses of numerous clients.