Corporate Tax Penalties: Fines, Violations, and Solutions

The implementation of corporate taxation in the UAE would comply with international standards to guarantee a transparent business income taxation process. According to the existing corporation tax framework, failure to Tax filing deadlines for businesses. The amendments were introduced by the Ministry of Finance, UAE in Cabinet Decision No.75/2023 that declared effective on 1st August  2023. These amendments established administrative financial penalties and fines for violations of Federal Decree-Law No. 47/2022 on businesses and corporation taxation.

UAE announces penalty for late Corporate Tax registration

On March 1, 2024, the UAE Ministry of Finance will impose a Dh10,000 penalty for late Corporate Tax registrations. This measure, announced on February 27, 2024, aims to ensure timely compliance with the nation's tax regulations. Businesses need to be aware of this change and take action early to avoid the fine.

  • If a business does not keep proper records as required by law, it will be fined AED 10,000.
  • If the same mistake is made again within 24 months, the fine increases to AED 20,000.

 The fine is meant to incentivize taxpayers to abide by the tax code and timely register for corporation tax. The fine amount for late registration for value-added tax and excise tax is the same.

Administrative Fines and Penalties

Maintaining Records and Submitting Information:-

Penalties for Neglecting to Keep Up Required Documents and Data:

  • The penalty for breaking the record-keeping requirements is 10,000 AED for each violation.
  • If the violation is committed again in 24 months, the penalty increases to AED 20,000.

Document Submission in Arabic:

  • AED 5,000 will be deducted if necessary documentation is not provided in Arabic upon request.

Application for Deregistration:

  • Penalties apply if a deregistration application is not submitted within the allotted time.
  • Penalties for late corporate tax filing range from 1,000 to 10,000 AED.

Modification of Tax Documents:

  • Every time a tax record modification is required, the Authority is notified, and there is a penalty of AED 1,000.
  • Within 24 months, there is a penalty of AED 5,000 for repeat infractions.

Notifying Legal Representatives and Filing Tax Returns

Penalties Applied to Attorney/legal representatives:-

  • Penalties apply to legal representatives who do not inform their appointment or file tax returns within the allotted time.
  • The initial fines are set at AED 500 for the first twelve months.
  • After the thirteenth month, the penalty rises to 1,000 AED.

Resolving Accountable Tax:

  • A monthly penalty of 14% per year is applied to unpaid payable tax amounts starting the day after the payment deadline.

Also Read: Deadline for Corporate Tax Registration in UAE 2024

Violations and Penalties for UAE Corporate Tax

Federal Decree-Law No. 47 of 2022, which is the Corporate Tax Law, and its revisions, Cabinet Decision No. 10 of 2024, are listed in this table along with the corresponding penalties for violating them. Based on infractions of the Corporate Tax Law and the Tax Procedures Law, the fines are determined by Cabinet Decision No. 75 of 2023.

 

No. Violation Description   Administrative Fine/Penalty in AED
1 If necessary information and records are  not maintained as per the Corporate Tax and Tax Procedures Law, there may be a penalty/fine of AED 10,000 per violation For each violation AED 10,000  and More than 20,000 AED for multiple violations  within 24 months
2 Not providing information, records, and paperwork in Arabic as requested by the Authority AED 5,000
3 Failure to submit the deregistration application by the deadline; a fine of AED1,000 each month, up to AED10,000 AED 1,000 each month, up to AED 10,000
4 Failure to notify the Authority of any case necessitating updating tax records AED1,000 for each infraction, More than AED 5,000 for multiple infractions over 24 months
5 The Legal Representative's failure to announce their appointment AED 1,000 (from the personal funds of the Legal Representative)
6 The Legal Representative's failure to timely file a tax return,  500 AED for each month throughout the first 12 months and AED 1,000 monthly after 1st year (from the funds of the Legal Representative)
7 Failure to file an income tax return on time AED 500 for the first 12 months and AED 1,000 for each month after the 13th months
8 Not paying the payable taxes A 14% annual monthly penalty on the outstanding amount of payable taxes, beginning the day after the payment deadline
9 Filing an inaccurate Tax Return AED 500, if it isn't amended by the deadline
10 Filing a voluntary disclosure regarding mistakes in a tax return, tax assessment, or application for a refund A one percent monthly penalty on the tax difference, beginning the day after the applicable tax return, tax refund application, or tax assessment deadline
11 Failure to submit a voluntary disclosure knowingly about an audit 1 percent monthly fine imposition in case of Tax Difference, applicable from the filing of refund application, Tax Return, or from the date of Tax Assessment, an additional fine of 15% may be imposed on the Difference of Tax 
12 Not providing the Tax Auditor with facilitation AED 20,000 (from the money of the Person, Legal Representative, or Tax Agent, as appropriate)
13 Not submitting, or submitting a Declaration AED 500 after the deadline for each of the first twelve months AED 1,000 for every month starting in the thirteenth month
14 Not submitting the corporate tax registration application by the deadline AED 10,000

Frequently Asked Questions (FAQS)

How to Avoid corporation tax penalties and fines?

You must file your corporation tax return before the time and keep accurate records to avoid corporate tax fines and penalties in the United Arab Emirates. If you find a mistake in your submission, you can avoid fines by fixing it before the deadline. This strategy places a strong emphasis on the necessity of careful tax administration and compliance to avoid penalties.

How Does A  Company Select a Tax Agent?

If a Tax Agent of a taxable firm does not quickly notify the Federal Tax Authority (FTA) of their appointment, they will be fined 10,000 dirhams. A penalty of 1,000 AED may be imposed in case of the first violation and 2,000 AED for another violation within 2 years consecutive, in case he fails to file the tax return within the specified time for the taxable entity.

How To Select the UAE's Tax Consultant Services?

It's important to get ready before diving into the practical side of things. When dealing with Corporate Tax UAE, you should consider expert corporate tax advising services that assist you in avoiding any potential penalties. The most recent laws and guidelines on corporation tax in the United Arab Emirates are also known to corporate tax experts. Therefore, it makes sense to take advantage of that astute option for the successful advancement of your business. Therefore, before the law is fully implemented, get more information about corporation tax law by getting in touch with our excellent consulting firm.

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