UAE Ministry of Finance Imposes New Dh 10,000 Late Registration Penalty For Corporate Tax

UAE Cabinet Resolution No. 10 of 2024: Enhancing Tax Compliance

A 10,000 AED fine has been imposed recently for late corporate tax registration. The government of UAE has released Cabinet Decision No. 10 of 2024, which is a significant development with broad ramifications for enterprises all throughout the country, according to the Ministry of Finance UAE. Important changes are made to some sections of Cabinet Resolution No. 75 of 2023 by this resolution, which mainly focuses on administrative fines associated with the implementation of Federal Decree-statute No. 47 of 2022, a statute that directly targets corporation and commercial tax rules.

What Is Significance Of AED 10,000 Penalty For Late Corporate Tax Registration?

The Federal Tax Authority has implemented penalties under the amended laws that are primarily aimed against late company tax registration in the United Arab Emirates. Companies will now be subject to a 10,000 AED financial charge if they do not register within the allotted periods. It's significant to remember that this fine is equivalent to what other tax categories, including excise and value-added tax (VAT), charge for late registration. Promoting adherence to tax rules and regulations across a range of industries is the main goal.

Understanding Tax Compliance Penalties

For both people and corporations, paying taxes on time is an essential part of being financially responsible. If tax obligations are not paid within the specified time, several administrative penalties take effect. To maintain the reliability of taxation and ensure compliance, certain fines are in place.

Administrative Penalties for Record-Keeping Violations

Keeping proper documents and information is one important aspect. There might be heavy fines for not doing so. The penalties are set up as follows:

1. First Offence: AED 10,000 is the initial penalty for any infringement of record-keeping.
2. Frequent Infractions: If an organisation violates more than once in 24 months, the fine increases to AED 20,000 for each offence.

Arabic Document Submission Is Required:

One essential criterion that businesses and people with tax obligations must follow is providing all required documentation in Arabic upon request. The penalty for breaking this regulation is AED 5,000.

Also Read: Deadline for Corporate Tax Registration in UAE 2024

Deadlines for Deregistration Applications

Registrants who submit deregistration applications must carefully follow deadlines. On-time compliance guarantees seamless operations and keeps you out of unneeded trouble.

Ministerial Decision 75 of 2023, Revised Administrative Penalties

The administrative fines listed in the most recent cabinet decision have undergone major adjustments thanks to the UAE government's Ministerial Resolution 75 of 2023. The objective of these modifications is to improve adherence to tax laws and guarantee equitable implementation for all taxable organisations. The following are the main changes:-

1.  Not Submitting an Application for Registration:

An AED 20,000 fine was previously imposed for submitting a registration application beyond the deadline. However, this fine has been lowered to AED 10,000 under the amended decision. To avoid this penalty, taxable individuals must now submit their registration applications as soon as possible.

2.  Not Submitting an Application for Deregistration:

The penalty system has been changed for registrants who do not file a deregistration claim within the allotted period. This is how it operates:

• Penalty at First: The penalty is set at 10,000 AED.
• Reduction of Monthly: The penalty is reduced by AED 1,000 for each additional month of non-compliance, with an aggregate total penalty of AED 10,000.

Taxable entities must follow the deregistration procedure precisely to prevent unneeded financial repercussions.

3.  Provide Services Without Filing a Tax Invoice:

There have been major modifications to the penalty for making a supply without presenting a legitimate tax credit note, tax invoice,  or similar document:

• Prior Penalty: The penalty was set at AED 5,000 for each tax invoice at first.
• Updated Penalty: The fine has been lowered to AED 2,500 for each instance that has been found. The purpose of this modification is to achieve an equilibrium between pragmatic concerns and enforcement.

Furthermore, each tax invoice has a penalty of AED 5,000, which is further lowered to AED 2,500 if a taxable organisation does not follow the guidelines and processes for creating digital tax invoices and credit notes.

4.  Overdue Tax Payment:

The amended ruling concerns overdue tax payments as well. The new penalty for late payments is computed as follows:

• First Late Payment: On the day after the payment deadline, 2% of the outstanding tax amount.
• Penalty per month: Starting one month beyond the payment deadline, there is a 4% monthly penalty if the unpaid tax is still payable. Every month, this cycle repeats on the same day.
• Uppermost Limit: The total penalty cannot be more than 300% of the amount of overdue taxes.

It is highly recommended that taxpayers fulfil their tax responsibilities on time to prevent hefty fines. In addition to guaranteeing efficient corporate operations, compliance supports the UAE's general economic stability.

As a result, the United Arab Emirates (UAE) has made great strides in improving tax compliance with the issue of Ministerial Decision No. 10 of 2024. The UAE government has shown its commitment to streamlining corporate tax law by revising specific sections mentioned in Ministerial Decision No. 75 of 2023. This includes administrative fines related to Federal Decree-Law No. 47 of 2022 covering corporation and commercial tax.

The implementation of a 10,000 AED penalty for late company tax registration is a significant component of the agreement. This fine is consistent with other tax categories that have similar penalties for late registration, highlighting a coordinated strategy for tax law enforcement that encourages compliance in several industries.