UAE Corporate Tax: List of Violations & Penalties
The UAE Cabinet has issued the Cabinet Decision No. (75) of 2023 which lists the violations and penalties related to corporate tax. As per the new Cabinet Decision, the Federal Tax Authority (FTA) penalties will impose administrative penalties on taxable persons who fail to comply with the provisions of the UAE Corporate Tax Law. Taxable persons, including individuals and legal persons, are required to immediately review their corporate tax preparation process to ensure they are on the right side of the law.
Corporate tax advisers in Dubai can advise you and save you from incurring hefty penalties. The Cabinet Decision on UAE corporate tax administrative penalties will come into effect from August 1st 2023. Here is a list of UAE corporate tax violations and penalties:
Failure to keep records and mandatory information
If a taxable person fails to keep the required records and other information specified in the Tax Procedures Law or Corporate Tax Law, one of the following UAE corporate tax penalties will apply:
- AED 10,000 for each violation.
- AED 20,000 in each case of repeated violation within 24 months from the date of the last violation
Failure to submit mandatory data, records and documents in Arabic
A penalty of AED 5000 will be imposed on taxable persons failing to submit the data, records and documents related to Tax in Arabic to the FTA when requested.
Failure to file for deregistration within the deadline
It will be considered as a serious violation of the UAE corporate tax law, if a person fails to a deregistration application within the timeframe specified in the Corporate Tax Law and its implementing decisions. Such a violation will incur a penalty of AED 1,000 in case of late submission of the application and on the same date monthly, up to a maximum of AED 10,000.
Failure to inform amendments of information on tax records
A taxable person is required to inform the FTA of any case that may require the amendment of the information pertaining to his Tax record kept by the Authority. Such a violation will lead to any of the following penalties:
- AED 1,000 for each violation
- AED 5,000 in each case of repeated violation within 24 months from the date of the last violation
Legal representative fails to notify the appointment
The legal representative of the taxable person is required to notify the FTA of his or her appointment within the specified timeframes. In such situations, the penalties will be due from the Legal Representative’s funds. The legal representative will be liable to pay a penalty of AED 1000.
Failure of the legal representative to file a tax return
A legal representative failing to file a tax return within the specified period will incur penalties as per Cabinet Decision No. (75) of 2023. In such a case, the penalties will be due from the Legal Representative’s own funds. Moreover, the penalty will be imposed from the day following the expiry date of the timeframe within which the Tax Return must be submitted, and on the same date monthly thereafter. The following types of penalties will apply:
- AED 500 for each month, or part thereof, for the first twelve months
- AED 1,000 for each month, or part thereof, from the 13thmonth onwards
Registrant fails to file a tax return on time
If a tax registrant fails to file a tax return within the timeframe specified in the UAE Corporate Tax Law, he or she is liable to pay a hefty penalty to the FTA. The penalty will be imposed from the day following the expiry date of the timeframe within which the Tax Return must be submitted, and on the same date monthly thereafter. Corporate tax consultants in Dubai can help the registrants in such cases. The following penalties will apply for such violations:
- AED 500 for each month, or part thereof, for the first 12 months
- AED 1,000 for each month, or part thereof, from the thirteenth month onwards
Not settling the Payable Tax
Failure of the taxable persons to settle the payable tax will incur a monthly penalty of 14% per annum, for each month or part thereof, on the unsettled Payable Tax amount from the day following the due date of payment and on the same date monthly thereafter. The due date of payment in the case of the Voluntary Disclosure and Tax Assessment will be as follows:
- 20 Business Days from the date of submission, in the case of a Voluntary Disclosure
- 20 Business Days from the date of receipt, in the case of a Tax Assessment
Submission of incorrect tax return
If a tax registrant submits an incorrect tax return, he or she will incur a penalty of AED 500, unless the Person corrects his Tax Return before the expiry of the deadline for the submission of the Tax Return according to the UAE Corporate Tax Law. Tax agents in Dubai can help you file your tax returns accurately.
Voluntary Disclosure Submission
Penalties will apply when taxable persons submit a Voluntary Disclosure in relation to errors in the Tax Return, Tax Assessment or Tax Refund application pursuant to Clauses (1) and (2) of Article (10) of the UAE Tax Procedures Law. In such a case, the FTA will impose a monthly penalty of 1% on the Tax Difference, for each month or part thereof, to be applied as of the date following the due date of the relevant Tax Return, the submission of the Tax refund application, or the Notification of the Tax Assessment and until the date the Voluntary Disclosure is submitted.
Failure to Submit a Voluntary Disclosure
Penalties will apply if the Taxable Person fails to submit a Voluntary Disclosure in relation to errors in the Tax Return, Tax Assessment or Tax refund application pursuant to Clauses (1) and (2) of Article (10) of the Tax Procedures Law, before being notified by the FTA that it will be subject to a Tax Audit. A fixed penalty of 15% will apply to the Tax Difference. Moreover, a monthly penalty of 1% on the Tax Difference will also apply for each month or part thereof in the following manner:
- Where the Taxable Person submits a Voluntary Disclosure after being notified that it will be subject to a Tax Audit by the Authority, the penalty shall be imposed for the period from the day following the due date of the relevant Tax Return, or the submission of the Tax refund application or notification of the Tax Assessment and until the date the Voluntary Disclosure is submitted
- Where the Taxable Person fails to submit a Voluntary Disclosure, the penalty will be imposed as of the date following the due date of the relevant Tax Return, or the submission of the Tax refund application or Notification of the Tax Assessment and until the date of issuance of the Tax Assessment
Not offering facilitation to Tax Auditor
It is a serious compliance failure when a taxable person subject to FTA tax audit, his tax agent or legal representative fails to offer facilitation to the Tax Auditor. It is a violation of the provisions of Article (20) of the Tax Procedures Law, and the penalties will be due from the Person’s, Legal Representative’s or Tax Agent’s own funds, as applicable. A penalty of AED 20,000 will apply in such a case. Consult with corporate tax agents in Dubai to avoid this penalty.
Penalties related to submission of Declaration
Failure to submit a Declaration to the FTA or submitting a Declaration late invites hefty penalties. This violation will attract the following types of penalties. Remember that this penalty will be imposed from the day following the expiry date of the timeframe within which the Declaration must be submitted, and on the same date monthly thereafter.
- AED 500 for each month, or part thereof, for the first twelve months
- AED 1,000 for each month, or part thereof, from the thirteenth month onwards
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