Administrative Penalties for Violations related to Corporate Tax
What is Corporate Tax in UAE?
Corporate Tax is a type of direct tax imposed on the overall earnings of corporations and other enterprises. In some jurisdictions, it is alternatively known as “Corporate Income Tax” or “Business Profits Tax.”
What are the penalties in Corporate Tax?
Penalties for Delayed Submission of Corporate Tax Returns
Late submission of corporate tax returns can lead to substantial fines. The penalty structure for late payment of tax liability is as follows: 2% of unpaid tax is due on the day following the due date. 4% of unpaid tax is applied monthly, starting one month after the due date.
For instance, if a business’s fiscal year ends in April and the tax return filing deadline is on the 15th day of March, failure to comply with federal decree laws or filing tax returns after the due date can result in significant financial penalties.
Penalty for Delayed Payment of Corporate Tax In the UAE
The late payment penalty for corporate tax is calculated using the following formula:
- A fixed penalty, typically a percentage of the outstanding tax amount, is imposed for the first month of delay.
- Each subsequent month of delay incurs an additional fixed penalty.
- Interest is applied to the overdue tax amount, starting from the due date and continuing until the full tax amount is paid.
Following is the List of Penalties for Violations Concerning Corporate Tax:
No. | Description of Violation | Administrative Penalty Amount in AED |
Keeping Records | ||
1 | Neglect by an individual conducting a business or business activity, or with tax obligations as per the Tax Procedures Law or Corporate Tax Law, to maintain necessary records and information stipulated in these laws. | a. A charge of 10,000 for each violation. b. 20,000 for repeated violation within 24 months of the last offense. |
2 | Failure of an individual engaged in business, business activity, or with tax obligations under the Tax Procedures Law or Corporate Tax Law to provide Tax-related data, records, and documents in Arabic upon Authority’s request. | Penalty: 5,000 |
4 | Failure of a registrant to notify the Authority of changes necessitating an amendment to their Tax record held by the Authority. | a. 1,000 for each violation. b. 5,000 for repeated violation within 24 months of the last offense. |
Deregistration | ||
3 | Inability of a registrant to file a deregistration application within the timeframe specified in the Corporate Tax Law. | a. 1,000 for late application submission, accruing on a monthly basis to a maximum of 10,000. |
Legal Representative | ||
5 | Legal representative’s delay in informing their appointment within set timeframes, leading to penalties from their own funds. | Penalty: 1,000 |
6 | Legal representative’s tardiness in filing a Tax Return within specified timeframes | a. 500 per month, up to 12 months. b. 1,000 per month, from the 13th month onwards. |
Compliance | ||
7 | Registrant’s failure to submit a Tax Return within Corporate Tax Law timeframe | a. 500 per month, up to 12 months. b. 1,000 per month, from the 13th month onwards. |
8 | Taxable individual’s non-payment of Payable Tax | a. 14% per annum, applied monthly, on unsettled Payable Tax from payment due date. b. Different due dates for Voluntary Disclosure and Tax Assessment. Within 20 days from the date of Voluntary Disclosures and Tax Assessment. |
9 | Submission of incorrect Tax Return | Penalty: 500, unless corrected before the Tax Return deadline. |
Voluntary Declaration | ||
10 | Voluntary Disclosure submission for Tax Return, Assessment, or refund 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. | 1% monthly on Tax Difference from relevant due date. |
11 | Failure to submit Voluntary Disclosure before Authority’s Tax Audit notice 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 Authority that it will be subject to a Tax Audit. | a. 15% fixed penalty on Tax Difference. b. 1% monthly on Tax Difference, depending on circumstances. |
Non-cooperation during Tax Audit | ||
12 | Non-compliance with Tax Auditor facilitation, as per Article (20) of Tax Procedures Law | Penalty: 20,000 |
Submission of declaration | ||
13 | Non-submission or delayed Declaration to the Authority as required by Corporate Tax Law: Penalties | a. 500 per month, up to 12 months. b. 1,000 per month, from the 13th month onwards. |
The decision is effective from 1 August 2023. Punctual payment of corporate taxes is crucial for companies to avoid these fines and potential penalties. Complying with tax laws and promptly fulfilling tax responsibilities is essential to prevent financial difficulties and maintain a positive relationship with the tax authorities. Penalties will be levied on both individual and corporate taxpayers who fail to fulfill their obligations under the UAE Corporate Tax Law.
This article was published on 28 August 2023
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