Details of the New Penalty for Late Corporate Tax Registration in UAE

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This article has been researched and written by the Tax & Compliance Team at Creation Business Consultants. AI has not been used in generating this article.

The UAE introduced a federal corporate tax regime, effective from June 1, 2023. The standard corporate tax rate is 9% on taxable income exceeding AED 375,000 (approximately USD 102,000). Income up to this threshold is tax-exempt.

ENTITIES REQUIRED TO REGISTER FOR UAE CORPORATE TAX

Corporate tax registration In the UAE, is mandatory for various types of entities and businesses, as outlined below:

Natural persons with a turnover exceeding AED 1 million.
All entities conducting business activities within the UAE, including those incorporated in mainland UAE, must register for corporate tax. This includes:
- Limited Liability Companies (LLCs).
- Joint Stock Companies.
- Partnerships.
- Sole Establishments.
Foreign companies with a permanent establishment.
Free zone entities.

ENTITIES EXEMPT FROM UAE CORPORATE TAX

In the UAE, the following entities are exempt from corporate tax registration:

Government entities.
Government-controlled entities.
Extractive and non-extractive natural resource businesses.
Qualifying public benefit entities.
Qualifying investment funds.
Public pension or social security funds.
Private pension or social security funds.
Wholly owned and controlled subsidiaries of exempt organizations in the UAE.
Non-resident entities that do not have a physical permanent establishment or a nexus in the UAE.

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CORPORATE TAX REGISTRATION DEADLINE

The decision indicates that a juridical person, which is a Resident Person incorporated, established, or otherwise recognized prior to March 1, 2024, must apply for corporate tax registration within the following timeframes to avoid penalties:

MONTH OF LICENSE ISSUANCE	DEADLINE TO APPLY FOR CORPORATE TAX REGISTRATION
January or February	May 31, 2024
March or April	June 30, 2024
May	July 31, 2024
June	August 31, 2024
July	September 30, 2024
August or September	October 31, 2024
October or November	November 30, 2024
December	December 31, 2024

As for a juridical person that is a resident person, including free zone persons, incorporated, established, or otherwise recognized under applicable laws in the UAE on or after March 1, 2024, they must apply for corporate tax registration within three (3) months from the date of incorporation, establishment, or recognition.

UAE CORPORATE TAX FILING DEADLINE

The filing must be completed electronically no later than nine months after the end of the relevant tax period. Any UAE corporate tax payable must also be settled within this timeframe.

CORPORATE TAX VIOLATIONS AND ADMINISTRATIVE PENALTIES:

Various corporate tax penalties are imposed based on the nature of the violation. Penalties can either be a fixed amount or a variable percentage.

Cabinet Decision No. 75 of 2023 and Cabinet Decision No. 10 of 2024 outline the following corporate tax penalties:

DESCRIPTION OF VIOLATION	ADMINISTRATIVE PENALTY AMOUNT IN AED
Failure to apply for corporate tax registration within the specified deadlines	10,000
Failure to keep the required records and other information as specified in the Tax Procedures Law and Corporate Tax Law	1. 10,000 per violation 2. 20,000 for repeated violations within 24 months
Failure to submit tax-related data, records, and documents in Arabic to the Authority when requested	5,000
Failure to submit a deregistration application within the specified timeframe	1,000 for late submission and an additional 1,000 monthly, up to a maximum of 10,000
Failure to inform the Authority of changes or amendments to the tax record information	1. 1,000 per violation 2. 5,000 for repeated violations within 24 months
Failure to submit a tax return within the specified timeframe	1 500 per month, or part thereof, for the first 12 months 2. 1,000 per month, or part thereof, from the 13th month onwards
Failure to settle corporate tax liabilities (if any)	A monthly penalty of 14% per annum on the unsettled payable tax amount, from the day following the due date, applied monthly
Failure to settle corporate tax liabilities in the case of voluntary disclosure or tax assessment	A monthly penalty of 14% per annum on the unsettled payable tax amount from: 1. 20 business days from the date of submission, in the case of voluntary disclosure 2. 20 business days from the date of receipt, in the case of tax assessment
Submission of an incorrect tax return	500, unless corrected before the deadline for submission
Submission of a voluntary disclosure related to errors in the tax return, tax assessment, or tax refund application	A monthly penalty of 1% on the tax difference, applied from the due date of the relevant tax return, tax refund application, or notification of tax assessment until the voluntary disclosure is submitted
Failure to submit a voluntary disclosure before being notified of a tax audit	1. A fixed penalty of 15% on the tax difference 2. A monthly penalty of 1% on the tax difference, applied as follows: • If voluntary disclosure is submitted after notification of a tax audit, the penalty is imposed from the due date of the tax return, tax refund application, or notification of tax assessment until the voluntary disclosure is submitted. • If no voluntary disclosure is submitted, the penalty is imposed from the due date until the issuance of the tax assessment.
Failure to submit or late submission of a declaration to the Authority, as required by the Corporate Tax Law	1. 500 per month, or part thereof, for the first 12 months 2. 1,000 per month, or part thereof, from the 13th month onwards

PREPARING AUDITED FINANCIAL STATEMENTS

A corporate tax-registered person is required to prepare and maintain audited financial statements for corporate tax purposes, regardless of their revenue.

For more information on how Creation Business Consultants can assist with tax services in the UAE, contact us today!

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